Adrian Corp. sells goods on account for $100,000 on May 1. On May 15, the customer returns $40,000 of the merchandise. The customer has not yet paid for any of the goods. What will Adrian record on May 15? (Select all that apply.)A. CREDIT TO ALLOWANCE FOR SALES RETURNSB. DEBIT TO SALES EXPENSEC. DEBIT TO SALES RETURNSD. CREDIT TO ACCOUNTS RECEIVABLE

The answers are C and D

Explanation:

In accounting, debit increases and credit decreases the following:

1. Asset

2. Expense

Also, debit decreases and credit increases the following:

1. Shareholders' equity

2. Liability

3. Sales or revenue or income.

The goods that was returned on May 15 is called Sales return. Because sales return reduces the sale that had been done before we will debit sales return.

Accounts Receivable is an asset and because the returned goods will reduce it, we will credit accounts receivable.

A. CREDIT TO ALLOWANCE FOR SALES RETURNS

D. CREDIT TO ACCOUNTS RECEIVABLE

Explanation:

The journal entry for recording the sale should be:

May 1, sold goods on account

Dr Accounts receivable 100,000

    Cr Sales revenue 100,000

The journal entry for recording the return of merchandise should be:

May 15, customer returns merchandise

Dr Allowance for sales returns 40,000

    Cr Accounts receivable 40,000

*Allowance for sales returns reduces gross sales.