When goods are returned, the seller records the returned merchandise at its market value on the statement of financial position.

Question

Quizplus · Accepted Answer

When goods are returned, the seller records them at their original cost or lower net realizable value, whichever is lower, on the statement of financial position. This principle is known as the lower of cost or market (LCM) rule. Therefore, the returned merchandise is not recorded at its market value.

When Goods Are Returned, the Seller Records the Returned Merchandise