After the amount due on a sale of $28,000, terms 2/10, n/eom, is received from a customer within the discount period, the seller consents to the return of the entire shipment for a cash refund. The cost of the merchandise returned was $16,800. (a) What is the amount of the refund owed to the customer? (b) Journalize the entries made by the seller to record the return and the refund.
Answer:
a. $27,440 [$28,000 – ($28,000 × 2%)]
b. Customer Refunds Payable27,440
Cash27,440
Merchandise Inventory16,800
Estimated Returns Inventory16,800