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14 November, 07:15

Adrian Corp. sells goods on account for $100,000 on May 1. On May 15, the customer returns $40,000 of the merchandise. The customer has not yet paid for any of the goods. What will Adrian record on May 15? (Select all that apply.)

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  1. 14 November, 07:26
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    The entry posting will be:

    Dr Sales returns $40,000

    Cr Trade Receivables $40,000

    Explanation:

    The reason is that when the products that Andrian Corporation delivered, the company recorded:

    Dr Trade Receivables $100,000

    Cr Sales $100,000

    So the entry when the goods were returned must record decrease in the sales and trade receivable amount because the $40,000 worth of sales is not actually made and now after returning the goods worth of $40,000, the customer actually owes the company $60,0000. So the trade receivable must be reduced by $40,000 and sales return must be recorded with the same amount and a debit entry.

    The entry will be:

    Dr Sales returns $40,000

    Cr Trade Receivables $40,000
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