During the year, sales returns and allowances totaled $65,900. The cost of the merchandise returned was $40,000.

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During the year, sales returns and allowances totaled $65,900. The cost of the merchandise returned was $40,000. The accountant recorded all the returns and allowances by decreasing the sales account and decreasing Cost of Merchandise Sold for $65,900. Was the accountant’s method of recording returns acceptable? Explain. In your explanation, include the advantages of using a sales returns and allowances account.

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