On July 1, Ferguson Company sold merchandise in the amount of $5,800 to Tracey Company, with credit terms of 2/10, n/30. The cost of the items sold is $4,000. Ferguson uses the perpetual inventory system and the gross method. On July 5, Tracey returns some of the merchandise. The selling price of the merchandise is $500 and the cost of the merchandise returned is $350. The entry or entries that Ferguson must make on July 5 is (are):

A.

Sales returns and allowances500 
Accounts receivable 500
Merchandise inventory350 
Cost of goods sold 350

B.
Accounts receivable500 
Sales returns and allowances 500
Cost of goods sold350 
Merchandise inventory 350

C.
Sales returns and allowances350 
Accounts receivable 350

D.
Accounts receivable500 
Sales returns and allowances 500

E.
Sales returns and allowances500 
Accounts receivable 500


Answer: A

Business

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