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On March 1, Showcase Co. , a furniture wholesaler, sells merchandise to Balboa Co. On account, $237,490, terms n/30. The cost of the merchandise sold is $152,560. Showcase Co. Issues a credit memo on March 5 for $31,500 as a price adjustment prior to Balboa Co. Paying the original invoice on March 29

Respuesta :

Because the sale is on account, we must report the rise in both sales revenue and accounts receivable. Accounts Receivable is an asset whose credit side lowers with sales returns and customer collections and whose debit side increases when a sale is made.

These are the journal entries:

$254,500 in merchandise inventory

$254,500 to Accounts Payable A/C

(It refers to goods bought with credit)

$30k in accounts payable to Dr.

$30k for merchandise inventory

(Given that the returned goods are documented)

Payables: Dr. $224,500

$30,000)

$224,500 in cash

($254,500)

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