In Case of Merchandise Return, the Inventory Account Is Increased

question 94

Multiple Choice

In case of merchandise return, the inventory account is increased by the amount of cost of the goods returned, and:​

• A) ​the customer refunds payable account is increased by the same amount.
• B) ​the estimated returns inventory account is decreased by the same amount.
• C) ​the accounts receivable account is increased by the same amount.
• D) ​retained earnings are decreased by the same amount.

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Definitions:

Equivalent Units

A method used in process costing that converts partially completed units into a smaller number of fully completed units.

Molding Department

A specialized section within a manufacturing facility where the shaping or forming of materials into products takes place, often involving processes like injection molding or casting.

Work In Process

Refers to the goods that are in the manufacturing process but are not yet complete; it's an inventory account on the balance sheet.

Bottling Department

The bottling department refers to a specialized division within a manufacturing or production facility that focuses on the filling, sealing, and packaging of liquid products.