On Dec. 7, Toys R Fun purchased $1,000 of merchandise with terms of 2/10,n/30.

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.

Debit Sales Returns and Allowances $500; debit Merchandise Inventory $150; credit
Accounts Receivable $500; and credit Cost of Goods Sold $150.
Debit Accounts Receivable $500 and credit Cash $500.
Debit Accounts Receivable $500; credit Sales Returns and Allowances $500; credit
Merchandise inventory $150; and credit Cost of Goods Sold $150.
Debit Sales Returns and Allowances $150; credit Accounts Receivable $150.


On Dec. 7, Toys R Fun purchased $1,000 of merchandise with terms of 2/10,n/30. If payment is
made on December 16, demonstrate the required journal entry for Toys R Fun to record the payment
under the perpetual inventory system.

Debit Accounts Payable $1,000; credit Cash $1,000; credit Purchase Discounts $20.
Debit Accounts Payable $1,000; credit Cash $1,000; credit Merchandise Inventory $20.
Debit Accounts Payable $1,000; credit Cash $1,000.
Debit Merchandise Inventory $20; debit Cash $980; credit Accounts Payable $1,000.