Jackson Company Uses the Perpetual Inventory System

Multiple Choice

Jackson Company uses the perpetual inventory system. It sold merchandise to Jenny. After one month, Jenny returned $250 worth of the merchandise which had a cost of $150. Which of the following journal entries records the cost of merchandise returned?

A) A debit to Accounts Receivable of $250, a credit to Sales Return and Allowances of $250
B) A debit to Cost of Goods Sold of $150, a credit to Merchandise Inventory of $150
C) A debit to Merchandise Inventory of $150, a credit to Cost of Goods Sold of $150
D) A debit to Accounts Receivable of $250, a credit to Merchandise Inventory of $250