### Transaction AnalysisOn March 1, Crunk Company sold merchandise for $5,800 to Wells Company, with credit terms of 2/10, n/30. The merchandise cost was $4,000. Crunk uses a perpetual inventory system and the gross method. Wells returned merchandise worth $350 on July 5. The selling price of the merchandise returned is $500, and the cost is $350. The appropriate journal entry or entries Crunk must make on July 5 are as follows:1. **Option 1** - **Debit:** Accounts Receivable $500 - **Credit:** Sales Returns and Allowances $5002. **Option 2** - **Debit:** Sales Returns and Allowances $500 - **Credit:** Accounts Receivable $5003. **Option 3** - **Debit:** Accounts Receivable $350 - **Credit:** Sales Returns and Allowances $3504. **Option 4** - **Debit:** Sales Returns and Allowances $350 - **Credit:** Accounts Receivable $350 - **Debit:** Cost of Goods Sold $3505. **Option 5** - **Debit:** Merchandise Inventory $500 - **Credit:** Sales Returns and Allowances $500 - **Debit:** Accounts Receivable $5006. **Option 6** - **Debit:** Sales Returns and Allowances $500 - **Credit:** Accounts Receivable $500 - **Debit:** Merchandise Inventory $350 - **Credit:** Cost of Goods Sold $350Each option outlines potential journal entries to account for sales returns, invoking considerations for the perpetual inventory system. The correct entry will maintain accurate financial and inventory records.

JOURNAL ENTRIESJournal Entry is the first stage of Accounting Process. Journal Entry is the Process…

On March 1, Crunk Company sold merchandise in the amount of $5,800 to Wells Company, with credit terms of 2/10, n/30. The cost of the items sold is $4,000. Crunk uses the perpetual inventory system and the gross method. On July 5, Wells returns some of the merchandise. The selling price of the merchandise is $500 and the cost of the merchandise returned is $350. The entry or entries that Crunk must make on July 5 is: 50e Accounts receivable Sales returns and allowances Sales returns and allowances Accounts receivable Accounts receivable Sales returns and allowances: Cost of goods sold Merchandise inventory Sales returns and allowances Accounts receivable Sales returns and allowances Accounts receivable Merchandise inventory Cost of goods sold 350 & B see 350 500 500 350 500 358 500 350 See 500 350

On March 1, Crunk Company sold merchandise in the amount of $5,800 to Wells Company, with credit terms of 2/10, n/30. The cost of the items sold is $4,000. Crunk uses the perpetual inventory system and the gross method. On July 5, Wells returns some of the merchandise. The selling price of the merchandise is $500 and the cost of the merchandise returned is $350. The entry or entries that Crunk must make on July 5 is: 50e Accounts receivable Sales returns and allowances Sales returns and allowances Accounts receivable Accounts receivable Sales returns and allowances: Cost of goods sold Merchandise inventory Sales returns and allowances Accounts receivable Sales returns and allowances Accounts receivable Merchandise inventory Cost of goods sold 350 & B see 350 500 500 350 500 358 500 350 See 500 350

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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