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14 August, 20:51

On October 5, Cullumber Company buys merchandise on account from Marin Company. The selling price of the goods is $6,650, and the cost to Marin Company is $3,010. On October 8, Cullumber returns defective goods with a selling price of $840 and a scrap value of $430. Record the transactions on the books of Marin Company, assuming a perpetual approach.

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  1. 14 August, 20:53
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    October 5 entries

    Debit Accounts receivable $6,650

    Credit Sales Revenue $6,650

    To record sales

    Debit Cost of goods sold $3,010

    Credit Inventory $3,010

    To record the cost of sales

    October 8 entries

    Debit Sales return $840

    Credit Accounts receivable $840

    To record sales reversal due to sales return

    Debit Inventory $430

    Credit Cost of goods sold $430

    Explanation:

    The perpetual inventory system is the one that ensures that the book balance for inventory is adjusted for every purchase, sale or return of inventory.

    When inventory is sold on account, the entries required are debit accounts receivable and credit revenue then Debit cost of goods sold and credit inventory.
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