On July 1,Ferguson Company Sold Merchandise in the Amount of $5,800

question 241

Multiple Choice

On July 1,Ferguson Company sold merchandise in the amount of $5,800 to Tracey Company,with credit terms of 2/10,n/30.The cost of the items sold is $4,000.Ferguson uses the perpetual inventory system and the gross method.On July 5,Tracey notifies Ferguson that some of the merchandise is defective.Ferguson agrees to a full refund for the items,and Tracey is allowed to keep the merchandise.The selling price of the merchandise is $500 and the cost of the merchandise is $350.The entry or entries that Ferguson must make on July 5 is:

• A) \(\begin{array}{|l|r|r|}
• \hline \text { Sales returns and allowances } & 500 & \\
• \hline \text { Accounts receivable } & & 500 \\
• \hline \text { Merchandise inventory } & 350 & \\
• \hline \text { Cost of goods sold } & & 350 \\
• \hline
• \end{array}\)
• B) \(\begin{array}{|l|r|r|}
• \hline \text { Sales retums and allowances } & 500 & \\
• \hline \text { Accounts receivable } & & 500 \\
• \hline
• \end{array}\)
• C) \(\begin{array}{|l|r|r|}
• \hline \text { Accounts receivable } & 500 & \\
• \hline \text { Sales returns and allowances } & & 500 \\
• \hline
• \end{array}\)
• D) \(\begin{array}{|l|r|r|}
• \hline \text { Accounts receivable } & 500 & \\
• \hline \text { Sales returns and allowances } & & 500 \\
• \hline \text { Cost of goods sold } & 350 & \\
• \hline \text { Merchandise inventory } & & 350 \\
• \hline
• \end{array}\)
• E) \(\begin{array}{|l|r|r|}
• \hline \text { Sales retums and allowances } & 350 & \\
• \hline \text { Accounts receivable } & & 350 \\
• \hline
• \end{array}\)

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