Mann Company uses the perpetual inventory method. After negotiations with one of its customers concerning the color of the merchandise sold to that customer, Mann allowed the customer to return all of the merchandise and issued a credit memorandum to that customer for $1,000. The merchandise, which had a cost of $750, was restored to inventory. How would the company record this transaction?

rev: 10_18_2014_QC_56910

	Debit Accounts Receivable for $1,000, debit Merchandise Inventory for $750, and credit Sales Returns and Allowances for $1,750.
	Debit Accounts Receivable for $1,000, credit Sales Returns and Allowances for $1,000, debit Merchandise Inventory for $750, and credit Purchase Returns and Allowances for $750.
	Debit Accounts Receivable for $1,000, credit Sales Returns and Allowances for $1,000, debit Cost of Goods Sold for $750, and credit Merchandise Inventory for $750.
	Credit Accounts Receivable for $1,000, debit Sales Returns and Allowances for $1,000, debit Merchandise Inventory for $750, and credit Cost of Goods Sold for $750.
	Debit Accounts Receivable for $1,000 and credit Sales Returns and Allowances for $1,000.