On March 12, Klein Company sold merchandise in the amount of $9,200 to Babson Company, with credit terms of 2/10, n/30. The cost of the items sold is $5,200. Klein uses the perpetual inventory system and the net method of accounting for sales. On March 15, Babson returns some of the merchandise, which is not defective. The selling price of the returned merchandise is $740 and the cost of the merchandise returned is $420. The entry or entries that Klein must make on March 15 is (are):

Multiple Choice

• Sales returns and allowances	725
  Accounts receivable		725
  Merchandise inventory	420
  Cost of goods sold		420

• Sales returns and allowances	725
  Accounts receivable		725
  Merchandise inventory	412
  Cost of goods sold		412

• Accounts receivable	740
  Sales returns and allowances		740

• Accounts receivable	740
  Sales returns and allowances		740
  Cost of goods sold	420
  Merchandise inventory		420

• Sales returns and allowances	420
  Accounts receivable