10.) For a corporation, the equity section is divided into two main accounts: Common Stock and Retained Earnings. 11.) When a credit customer returns merchandise, a seller that uses the perpetual system would debit sales Returns and Allowances and credit Accounts Receivable and also debit Merchandise Inventory and credit Cost of Goods Sold. 12.) A company had a gross profit of $300,000 based on sales of $400,000, which means its cost of goods sold is equal to $700,000. 13. ) Cost of goods sold represents the value of merchandise sold to customers. 14.) The beginning merchandise inventory for the next period. Merchandise Inventory account balance at the end of one period is equal to the amount of 15.) Purchase allowances refer to merchandise a buyer acquires but then returns to the seller