Question

On October 5, Cullumber Company buys merchandise on account from Oriole Company. The selling price of the goods is $6,370, and the cost to Oriole Company is $3,420. On October 8, Cullumber Company returns defective goods with a selling price of $680 and a scrap value of $440.

Record the transactions of Cullumber Company, assuming a perpetual approach.

Answer 1

Answer:

On October 5

Debit Accounts receivable  $6,370

Credit Sales Revenue          $6,370

Debit Cost of goods sold     $3,420

Credit inventory account      $3,420

October 8

Debit Sales Revenue (Sales return) $680

Credit Accounts receivable              $680

Debit Inventory account    $440

Credit  Cost of goods sold  $440

Explanation:

When goods are on account, the entries required are

Debit Accounts receivable

Credit Sales Revenue

To record the amount made from sales. Furthermore, there is a reduction in inventory. This will also be accounted for by

Debit Cost of goods sold

Credit inventory account

When returns are made, the debits and credits above are reversed.