On Jan 5, a customer returned merchandise that had been purchased earlier on credit. The original sale was for $500, and the cost to the seller was $150. Demonstrate the required journal entry to record the return on the books of the seller, assuming the goods can be sold to another customer.

The journal entry for this returned purchase is as follows;

Dr. Sales Returns and Allowances $500

Dr. Merchandise Inventory $150

Cr. Accounts Receivable $500

Cr. COGS $150

Explanation:

The sales account is the revenue of the good/item purchased. The merchandise inventory is a type of an assets. The journal entry is important to a business so that they can track expenses incurred for the returned item. A new entry will need to be made when a new sale is made.

there was no passage listed but using the process of elimination i'd say it was d. the high economy would do the opposite. i don't see how low prices would affect it. high unemployment is possible but i feel d is the better answer.