Showcase Co., a furniture wholesaler, sells merchandise to Balboa Co. on account, $254,500, terms n/30

Showcase Co., a furniture wholesaler, sells merchandise to Balboa Co. on account, $254,500, terms n/30. The cost of the merchandise sold is $152,700. Showcase Co. issues a credit memo for $30,000 for merchandise returned prior to Balboa Co. paying the original invoice. The cost of the merchandise returned is $17,500. Journalize Showcase Co.’s entries for (a) the sale, including the cost of the merchandise sold; (b) the credit memo, including the cost of the returned merchandise; and (c) the receipt of the check for the amount due from Balboa Co.

Answer:

a. Accounts Receivable—Balboa Co. 254,500

Sales254,500

Cost of Merchandise Sold152,700

Merchandise Inventory152,700

b. Customer Refunds Payable30,000

Accounts Receivable—Balboa Co.30,000

Merchandise Inventory17,500

Estimated Returns Inventory17,500

c. Cash224,500

Accounts Receivable—Balboa Co.224,500