Question

Gershwin Wallcovering Inc. shipped the wrong shade of paint to a customer. The customer agreed to keep the paint upon being offered a 15% price reduction. Gershwin would record this reduction by crediting accounts receivable and debiting:
A) Inventory.
B) Sales discounts.
C) Sales.
D) Cost of goods sold
E) None of the above.

Answer 1

Answer:

B) Sales discounts.

Explanation:

Sales Discount is a contra revenue account which is adjusted in the sales to calculate the net sales value.

As the following transaction is already been recorded at the time of sale

Dr. Account receivable  xxxx

Cr. Sales                         xxxx

Sales account will not be debited to adjust the transaction. we will record this transaction in sales discount account which will ultimately adjusted.