Question

A customer purchased merchandise for $400 which cost the seller $200. The customer was dissatisfied with some of the goods and thus returned $100 worth and received a cash refund.

(a) What journal entries should the seller make when the merchandise is sold and at the time of the return? Assume that the seller uses a perpetual inventory system.
(b) If the seller uses a periodic inventory system, what entries would be made?

Answer 1

a)	Sales entry
1	Cash	400
	Sales revenue		400
2	Cost of goods sold	200
	Inventory		200
	Sales return entry
1	Sales return	100
	Cash		100
2	Inventory	50
	Cost of goods sold		50
b)	Sales entry
1	Cash	400
	Sales revenue		400
	Sales return entry
2	Sales return	100
	Cash		100