The debits and credits for five related transactions 1...

"The debits and credits for five related transactions (1) through (5), are presented in the following accounts Assume the credit terms were 2/10, n/30, using the net method under perpetual inventory system. Cash Sales 10,290 (1) 1,760 Accounts Receivable Cost of Goods Sold 11,760 1,470 7,000 10,290 Inventory 900 (2) ,000 Estimated Returns Inventory 900 Customer Refunds Payable 1,470 Describe each transaction Sold merchandise on account; net of discount: Recorded the cost of the goods sold and reduced the inventory account: Granted credit against customer' accounts receivable for returned merchandise Updated the inventory account for the cost of the merchandise returned Received the balance due_ What was the invoice amount of the merchandise that was returned?"

Transcript

00:01 Hi, in this video we are given debits and credits for five interrelated transactions.

00:10 So we will go through one by one each of these transactions, and the first one we have sold merchandise an account, not of discount.

00:22 So every time we sold a merchandise, of course, that's an automatic, every time, sorry, every time we sold merchandise on account.

00:33 Emphasize on account then we automatically debit our accounts receivable in the amount of 11 ,760.

00:47 So since it's a sale, so we will credit our sales account in the same amount.

00:58 For the second transaction, there's a return, i mean, we need to record the cost of goods sold and reduce the inventory account.

01:08 So since we're using the perpetual inventory system for which we need to update our inventory balance from time to time.

01:18 So that's why we need to update also our cost of goods sold.

01:23 So every time there's a sale, then you need to debit your cost of goods sold in the amount of $7 ,000.

01:42 And you need to reduce your inventory account by $7 ,000.

01:48 So it's a credit to your inventory.

01:54 For the third transaction, you granted a credit against a customer's accounts receivable for the return merchandise.

02:03 So the customer returned the merchandise.

02:08 So you will no longer receive a payment for that specific merchandise.

02:14 So it should be a credit to your accounts receivable in the amount of $1 ,400.

02:23 And since a it is a return you need to debit your customer refund payable account this account functions like the sales and return allowance account so it's a contra sales account so you need to debit it every time there's a return of merchandise so the fourth transaction the inventory account for the cost of the merchandise return.

03:06 So in the third transaction, the customer returned the merchandise.

03:11 Therefore, we need again to update our cost of goods hold and inventory account.

03:18 So since it's a return of merchandise, our inventory will be increased.

03:24 So it is a debit to our inventory account in the amount of 900 pesos.

03:32 And since it's a return so we need to credit our estimated returns inventory account this is what you should credit every time there's a return of merchandise so the fifth transaction you have received the balance due so what's your balance due that's actually your accounts receivable you have collected in other words the balance of your accounts receivable...

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