Question

Towbin Products sells merchandise on credit for $7,000 on December 1, 2019. The merchandise cost Towbin $4,900 (70% of the selling price). Towbin estimates that returns and allowances will amount to 4% of sales. On December 22, 2019, a customer returns for credit merchandise originally sold on December 1 for $200. Assume that Towbin uses a perpetual inventory system. Prepare the journal entries to record the preceding sale and the return of merchandise.

Answer 1

Journal Entries:

Date	Account Titles and Explanation	Debit	Credit
Dec. 1	Account Receivable	$        7,000
	Sales Revenue		$            7,000
	(To record sales made)
Dec. 1	Cost Of Goods Sold [7000 * 70% ]	$        4,900
	Inventory		$            4,900
	( To record Cost of goods sold)
Dec. 22	Sales return and allowance	$            200
	Account Receivable		$                200
	(To record sales returns)
Dec. 22	Inventory [200*70%]	$            140
	Cost Of Goods Sold		$                140
	( To record Cost of goods sold)