91Ó°ÊÓ

During the year, sales returns and allowances totaled \(\$ 235,750\). The cost of the merchandise returned was \(\$ 141,450\). The accountant recorded all the returns and allowances by debiting the sales account and crediting Cost of Merchandise Sold for \(\$ 235,750\). Was the accountant's method of recording returns acceptable? Explain. In your explanation, include the advantages of using a sales returns and allowances account.

Merchandise is sold on account to a customer for \(\$ 18,000\), terms FOB shipping point, \(3 / 10, \mathrm{n} / 30\). The seller paid the transportation costs of \(\$ 375\). Determine the following: (a) amount of the sale, (b) amount debited to Accounts Receivable, (c) amount of the discount for early payment, and (d) amount due within the discount period.

A sale of merchandise on account for \(\$ 4,000\) is subject to a \(7 \%\) sales tax. (a) Should the sales tax be recorded at the time of sale or when payment is received? (b) What is the amount of the sale? (c) What is the amount debited to Accounts Receivable? (d) What is the title of the account to which the \(\$ 280\) is credited?

From the following list, identify the accounts that should be closed to Income Summary at the end of the fiscal year: (a) Accounts Receivable, (b) Cost of Merchandise Sold, (c) Merchandise Inventory, (d) Sales, (e) Sales Discounts, (f) Sales Returns and Allowances, (g) Salaries Expense, (h) Salaries Payable, (i) Supplies, (i) Supplies Expense.