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Luis sold good to Pedro in May 20×9 with a list price of $98000. Luis allowed a trade discount of 10%. Pedro returned goods with a list price of $3000 on 31st May……. How much should Luis record in the sales returned acct on 31st May?
A) $2700
B) $3000The answer is $2700 because the value of the original sale is after the trade discount of 10%.
I was wondering, if there was a cash discount would it have been included as well? My first answer was $3000 because I thought that the trade discount wouldn’t be included as the original price.
Thanks for the help!
If it was a cash discount then they will still only be credited with the cash they actually paid (otherwise they could make a profit by buying goods, paying quickly, and then returning them 🙂 )
However, the returns account will be debited with the full 3,000, and the discounts allowed account will be credited with the remaining 300 (to cancel the expense previously recorded).
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