Describe each transaction.
Cash Sales
(5) 39,200 (1) 42,000
Accounts Receivable Sales Discounts
(1) 42,000 (3) 2,000 (5) 800
(5) 40,000
Merchandise Inventory Sales Returns and Allowances
(4) 1,200 (2) 25,200 (3) 2,000
Cost of Merchandise Sold
(2) 25,200 (4) 1,200
Answer:
(1) Sold merchandise on account, $42,000.
(2) Recorded the cost of the merchandise sold and reduced the merchandise inventory account, $25,200.
(3) Accepted a return of merchandise and granted an allowance, $2,000.
(4) Updated the merchandise inventory account for the cost of the merchandise returned, $1,200.
(5) Received the balance due within the discount period, $39,200. [Sale of $42,000, less return of $2,000, less discount of $800 (2% × $40,000).]