Sales-Related Transactions

After the amount due on a sale of $16,000, terms 2/10, n/eom, is received from a customer within the discount period, the seller consents to the return of the entire shipment. The cost of the merchandise returned was $10,000.

a.What is the amount of the refund owed to the customer?

$

b.Illustrate the effects on the accounts and financial statements of the return and the refund. If no account or activity is affected, select "No effect" from the dropdown and leave the corresponding number entry box blank. Enter account decreases, net cash outflows, and all negative effects on net income as negative amounts.

• Statement of Cash FlowsBalance SheetIncome StatementAssets=Liabilities+Stockholders' EquityCashAccounts Payable
• Cash
• No effect
• +InventoryInventory
• Supplies
• No effect
• +Est. Returns Inventory Est. Returns Inventory
• Supplies
• No effect
• =Customer Refunds PayableAccounts Receivable
• Customer Refunds Payable
• No effect
• +No effectCapital Stock
• Retained Earnings
• No effect
• Statement of Cash FlowsIncome StatementOperatingFinancing
• Investing
• Operating
• No effect

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a. The amount of the refund will be the merchandise returned less the amount of discount.

b. There are two separate effects of this transaction: one for the sales component, discount, and payment and one for the cost of the inventory sold and return of the merchandise to inventory.