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College Accounting (Book Only): A ...

13th Edition
Scott + 1 other
ISBN: 9781337280570

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BuyFindarrow_forward

College Accounting (Book Only): A ...

13th Edition
Scott + 1 other
ISBN: 9781337280570
Textbook Problem

Which of the following is a written statement indicating a seller’s willingness to reduce the amount of a buyer’s debt?

  1. a. Debit memorandum
  2. b. Credit memorandum
  3. c. Letter of intent
  4. d. Sales Returns and Allowances memorandum
  5. e. None of the above

To determine

Identify the option that is a written statement helps in indicating a seller’s willingness to reduce the amount of a buyer’s debt.

Explanation

Credit memorandum:

It is a written statement that indicates a seller’s willingness to reduce the amount of buyer’s debt. Amount to be deducted is recorded in the sales return and allowances account by the seller.

Justification for the incorrect answer:

Option a:

Debit memorandum does not indicate the seller’s willingness to reduce the amount of buyer’s debt. It is a notification provided by the buyer to the seller indicating a debit made on seller’s account in the buyer book.

Option c:

Letter of intent is not a written statement that indicates a seller’s willingness to reduce the amount of buyer’s debt. Amount to be deducted is recorded in the sales return and allowances account by the seller.

Option d:

Sales returns and allowance memorandum is not a written statement that indicates a seller’s willingness to reduce the amount of buyer’s debt...

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