Mack Industries Uses the Perpetual Inventory System

question 11

Multiple Choice

Mack Industries uses the perpetual inventory system. What is the entry to record $250 of returned merchandise, with a cost of $100, from customer Jake Sanders?

• A) Debit Sales Returns & Allowances for $250; credit Accounts Receivable for $250.
• B) Debit Sales Returns & Allowances for $250; credit Accounts Receivable for $250; debit Purchases for $100; credit Purchase Returns & Allowances for $100.
• C) Debit Sales Returns & Allowances for $250; credit Accounts Receivable for $250; debit Merchandise Inventory for $100; credit Cost of Goods Sold for $100.
• D) Debit Sales Returns & Allowances for $250; credit Cash for $100, credit Sales for $150.

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Definitions:

Total Profit

The financial gain obtained when total revenue exceeds total expenses from business operations.

Graph

A diagram representing data visually, using lines, bars, or other symbols.

Implicit Cost

Refers to the opportunity costs that are not directly paid for in money but represent the loss of value from using resources for a particular venture instead of their best alternative use.

Explicit Cost

Direct, out-of-pocket payments for goods or services used in the production of a product or offering of a service.