Question

On October 5, Cullumber Company buys merchandise on account from Marin Company. The selling price of the goods is $6,650, and the cost to Marin Company is $3,010. On October 8, Cullumber returns defective goods with a selling price of $840 and a scrap value of $430. Record the transactions on the books of Marin Company, assuming a perpetual approach.

Answer 1

Answer:

October 5 entries

Debit Accounts receivable  $6,650

Credit Sales Revenue                     $6,650

To record sales

Debit Cost of goods sold       $3,010

Credit Inventory            $3,010

To record the cost of sales

October 8 entries

Debit Sales return   $840

Credit Accounts receivable  $840

To record sales reversal due to sales return

Debit Inventory   $430

Credit Cost of goods sold   $430

Explanation:

The perpetual inventory system is the one that ensures that the book balance for inventory is adjusted for every purchase, sale or return of inventory.

When inventory is sold on account, the entries required are debit accounts receivable and credit revenue then Debit cost of goods sold and credit inventory.