Dogs R US uses the perpetual inventory system to account for its merchandise. A customer returned merchandise. Assuming that the purchase was originally bought on credit for $400 with a cost to Dogs R US of $100, demonstrate the required journal entry of Dogs R US.

Debit Sales Returns/Allowances $400

Credit Accounts Receivable $400

Debit Merchandise Inventory $100

Credit Cost of Goods Sold $100

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Business

Chad Mcmahon

28 June, 19:17

Dogs R US uses the perpetual inventory system to account for its merchandise. A customer returned merchandise. Assuming that the purchase was originally bought on credit for $400 with a cost to Dogs R US of $100, demonstrate the required journal entry of Dogs R US.

Debit Sales Returns/Allowances $400

Credit Accounts Receivable $400

Debit Merchandise Inventory $100

Credit Cost of Goods Sold $100

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Dominick Harvey · Answer 1

The journal entries are shown below:

1. Sales return and Allowances A/c Dr $400

To Account receivable A/c $400

(Being the returned inventory is recorded)

2. Merchandise inventory A/c Dr $100

To Cost of Goods sold A/c $100

(Being the cost of inventory is recorded)

Since the merchandise inventory is returned for $400 and the same is recorded and together with the cost of the merchandise inventory is also recorded