Question

2 pts Question 16 On July 1, Ferguson Company sold merchandise in the amount of $5,000 to Tracey Company, with credit terms of 2/10, 1/30. The cost of the items sold is $1,000. Ferguson uses the perpetual inventory system and the gross method. On July 5, Tracey 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 Ferguson must make on July 5 is (are): Sales returns and allowances Accounts receivable S00 Sod 500 Accounts receivable Sales returns and allowances Cost of poods sold Merchandise inventory 350 350 500 Accounts recevable Sales returns and allowances 500 500 500 • Sales returns and allowances Accounts receivable Merchandise inventory Cost of goods sold 350 Sales returns and allowances Accounts receivable 350 Question 17 2 pts ViewSonic

Answer 1

Account titles	Debit	Credit
Sales returns and Allowances	500
Accounts receivables		500
Merchandise Inventory	350
Cost of Goods Sold		350

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When merchandise inventory is returned, sales returns and allowance account has to be debited

Accounts receivable account has to be credited (since it is an asset account) to decrease the balance in it.

Under the perpetual inventory system, the following entry will come in addition to the above entry

Merchandise inventory account has to be debited (since it is an asset account) to increase the balance in it.

Cost of goods sold account has to be credited (since it is an expense account) to decrease the balance in it