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Adrian Corp. sells goods on account for $100,000 on May 1. On May 15, the customer returns $40,000 of the merchandise. The customer has not yet paid for any of the goods. What will Adrian record on May 15? (Select all that apply.)

Answer :

sadddamkashmiri801

Answer:

The entry posting will be:

Dr Sales returns $40,000

Cr      Trade Receivables $40,000

Explanation:

The reason is that when the products that Andrian Corporation delivered, the company recorded:

Dr Trade Receivables $100,000

Cr                          Sales            $100,000

So the entry when the goods were returned must record decrease in the sales and trade receivable amount because the $40,000 worth of sales is not actually made and now after returning the goods worth of $40,000, the customer actually owes the company $60,0000. So the trade receivable must be reduced by $40,000 and sales return must be recorded with the same amount and a debit entry.

The entry will be:

Dr Sales returns $40,000

Cr      Trade Receivables $40,000

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