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Accounting Entries for Goods Returns and Sales Discounts

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Accounting Entries for Goods Returns and Sales Discounts

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Questions and Answers

What accounts are affected when recording returned goods from customers at their sales price?

Prepaid expenses, Depreciation

Inventory, COGS

Sales returns and allowances, Cash or Accounts receivable (correct)

Sales discounts, Inventory

What is the purpose of the second entry when customers return goods?

Increase the owner's equity

Close temporary accounts

Update the Inventory account (correct)

Record Sales discounts

What is recorded when customers pay early to take advantage of terms offered?

COGS

Prepaid expenses

Sales discount (correct)

Sales returns and allowances

What is the main purpose of closing entries at the end of a period?

To zero out temporary accounts Signup and view all the answers

Which financial statement provides users with more information for decision-making?

Multi-step income statement Signup and view all the answers

What differentiates the preparation of the balance sheet for merchandising companies from that of service companies?

Addition of the asset account, Inventory Signup and view all the answers

What is the net sales revenue for October 2012?

$35,280 Signup and view all the answers

What is the gross profit for October 2012?

$13,680 Signup and view all the answers

Why might the physical count of inventory differ from the book balance?

Inventory shrinkage or theft Signup and view all the answers

What account should be closed first in the closing entries process?

Revenues Signup and view all the answers

If the unadjusted balance of the Inventory account was $63,000 and the physical count was $61,900, what is the adjusting entry?

Debit Cost of Goods Sold $1,100; Credit Inventory $1,100 Signup and view all the answers

What happens to the Sales Discount in the calculation of Net Sales Revenue?

It is deducted from Gross Sales Revenue Signup and view all the answers

What was the total amount of Sales Revenue reported by Carolina Communications?

$696,000 Signup and view all the answers

What is the total amount of Rockwell's Capital?

$208,000 Signup and view all the answers

How much was the Accounts Payable balance reported by Carolina Communications?

$17,000 Signup and view all the answers

What was the total amount of Inventory mentioned in the financial statements?

$261,000 Signup and view all the answers

Which account represents a Sales Discount in the financial statements?

$9,000 Signup and view all the answers

What was the total amount of Rent Expense reported by Carolina Communications?

$21,000 Signup and view all the answers