Michelin Jewelers Completed the Following Transactions

question 137

Multiple Choice

Michelin Jewelers completed the following transactions. Michelin Jewelers uses the perpetual inventory system. On April 2, Michelin sold $9,000 of merchandise to a customer on account with terms of 3/15, n/30. Michelin's cost of the merchandise sold was $5,500. On April 4, the customer reported damaged goods and Michelin granted a $1,000 sales allowance. Which of the following entries correctly records the sales allowance on Michelin's books?

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Definitions:

Potential Output

The highest level of real GDP that an economy can achieve when it is operating at full capacity, without causing inflation.

Recessionary Gap

A situation where an economy's real GDP is lower than its potential GDP, leading to underutilized resources and higher unemployment.

Potential Output

The maximum amount of goods and services an economy can produce when it is using all of its resources efficiently.

Deadweight Loss

A loss of economic efficiency that can occur when the equilibrium for a good or a service is not achieved or is not achievable, often due to market failure or intervention.