On December 2, a Customer Returned Merchandise, with a Selling

question 65

Multiple Choice

On December 2, a customer returned merchandise, with a selling price of $1,200 purchased on account, to a department store. Ignoring cost of goods sold, which journal entry should the department store prepare? Assume no sales discount was offered for early payment.

• A) Debit Sales Revenue for $1,200 and credit Sales Returns and Allowances for $1,200.
• B) Debit Sales Revenue for $1,200 and credit Accounts Receivable for $1,200.
• C) Debit Sales Returns and Allowances for $1,200 and credit Accounts Receivable for $1,200.
• D) Debit Sales Revenue for $1,200 and credit Cash for $1,200.

---

Definitions:

Lower Of Cost

An accounting principle stating that inventory or other assets should be recorded at the lower of either the original cost or the current market value.

Market

A place or system where buyers and sellers interact to trade goods, services, or securities.

Inventory Item

A product or goods held by a company for the purpose of sale or production in the normal course of business.

Inventory Turnover

Inventory turnover is a ratio that measures how many times a company's inventory is sold and replaced over a specific period, indicating efficiency in inventory management.