A Merchandiser Sold Merchandise Inventory on Account B) C) D)

question 103

Multiple Choice

A merchandiser sold merchandise inventory on account.The journal entry to record a sales allowance in the books of the merchandiser,using the perpetual inventory system would be:

• A) \[\begin{array} { | c | r | c | }
• \hline \text { Sales Returns and Allowances } & \mathrm { XX } & \\
• \hline \text { Merchandise Inventory } & & \mathrm { XX } \\
• \hline
• \end{array}\]
• B) \[\begin{array} { |l| r | r | }
• \hline \text { Refunds Payable } & \text { XX } & \\
• \hline \text { Accounts Receivable } & & \text { XX } \\
• \hline
• \end{array}\]
• C) \[\begin{array} { | l | r | r | }
• \hline \text { Cost of Goods Sold } & \mathrm { XX } & \\
• \hline \text { Sales Returns and } & & \\
• \text { Allowances } & & \mathrm { XX } \\
• \hline
• \end{array}\]
• D) \[\begin{array} { | l | r | r | }
• \hline \text { Estimated Returns Inventory } & \mathrm { XX } & \\
• \hline \text { Accounts Receivable } & & \mathrm { XX } \\
• \hline
• \end{array}\]

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Definitions:

Accounting Method

A set of rules used to determine when and how income and expenses are reported in the financial statements, such as cash basis or accrual basis accounting.

Retained Earnings

Retained earnings refer to the portion of net income left over after dividends are paid out to shareholders, which is reinvested into the company.

Retroactive Restatement

Adjusting previously reported financial statements to reflect better understanding or corrections of past errors.

Dividend Yield

A financial ratio that indicates how much a company pays out in dividends each year relative to its share price.