On March 12, Klein Company sold merchandise in the amount of $7,800 to Babson Company, with credit terms of 2/10, n/30. The cost of the items sold is $4,500. Klein uses the perpetual inventory system and the gross method of accounting for sales. On March 15, Babson returns some of the merchandise. The selling price of the merchandise is $600 and the cost of the merchandise returned is $350. Babson pays the invoice on March 20, and takes the appropriate discount. The journal entry that Klein makes on March 20 is:
A.
| Cash | 7,056 | |
| Accounts receivable | 7,056 |
B.
| Cash | 7,644 | |
| Sales discounts | 156 | |
| Accounts receivable | 7,800 |
C.
| Cash | 7,800 | |
| Accounts receivable | 7,800 |
D.
| Cash | 7,056 | |
| Sales discounts | 144 | |
| Accounts receivable | 7,200 |
E.
| Cash | 4,500 | |
| Accounts receivable | 4,500 |
Answer: D
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