Question

On March 12, Klein Company sold merchandise in the amount of $7,800 to Babson Company, with credit terms of 2/10, n/30. The cost of the items sold is $4,500. Klein uses the perpetual inventory system and the gross method of accounting for sales. On March 15, Babson returns some of the merchandise, which is not defective. The selling price of the returned merchandise is $600 and the cost of the merchandise returned is $350. The entry or entries that Klein must make on March 15 is (are):

Answer 1

Answer:

1. Debit Revenue: $600

Credit Account receivable: $600

2. Debit Merchandise: $350

Credit Cost of good sold: $350

Explanation:

On March 12, when sold merchandise to Babson Company, Klien Company must record their revenue and cost of the marchandise by 2 entries:

1. Debit Account receivable: $7,800

Credit Revenue: $7,800

2. Debit Cost of good sold: $4,500

Credit Merchandise: $4,500

On March 15, when received return marchandise, Klein must record to reduce their revenue and cost of good sale by 2 entries as the answer. This is matching concept in accounting.