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.)

Question

Kamari

Business

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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Answers (1)

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Lili · Answer 1

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