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m_a_m_a [10]
3 years ago
8

Accounts Receivable As of December 31, 2016, Nala Incorporated reported accounts receivable for $275,000 less allowance for doub

tful accounts of $27,000 on their balance sheet. During 2017, Nala Incorporated had the following transactions related to their receivables balance: 1. Sales on account $180,000 2. Collections of accounts receivable 125,000 3. Sales returns 20,000 4. Write-offs of accounts receivable deemed uncollectible 35,000 5. Recovery of bad debts previously written off 2,500 a) Prepare the journal entries for each of these five transactions b) Prepare the journal entry to record bad debt expense for 2017, assuming that the aging of accounts receivable indicates that estimated bad debts are 10% of accounts receivable.
Business
1 answer:
juin [17]3 years ago
7 0

Answer:

A.

1. Dr Accounts receivable $180,000

Cr Sales $180,000

2. Dr Cash $125,000

Cr Accounts receivable $125,000

3. Dr Sales returns and allowances $20,000

Cr Accounts receivable $20,000

4. Dr Allowance for doubtful accounts $35,000

Cr Accounts receivable $35,000

5. Dr Accounts receivable $2,500

Cr Allowance for doubtful accounts $2,500

Dr Cash $2,500

Cr Accounts receivable $2,500

B. Dr Bad debt expense $27,500

Cr Allowance for doubtful accounts $27,500

Explanation:

A1. To record the sale on account we will debit accounts receivable as our collectible to customer and credit sales in the amount of $180,000

A2. To record the collection, we will recognize the receipt of cash so we have to debit cash and credit accounts receivable to deduct the collectible balance in the amount of $125,000

A3. When the company receives returns from the customers, it will be charged to sales returns and allowances account so we have to debit it and credit accounts receivables in the amount of $20,000 to deduct collectibles to suppliers. Said, sales returns and allowances account is a contra account of sales. Thus, any amount recorded under it will be charged against (deduction) our sales.

A4. During the write off, we will debit allowance for doubtful accounts and credit accounts receivables to reduce its amount from the worthless receivables that is deemed to be uncollectible.

A5. Collection of previously written off receivables will resort to 2 entries. First, reversal of the original entry we made during the write off. So we debit Accounts receivable and credit allowance for doubtful accounts in the amount of $2,500. Next is to record the cash we received from the customer. So debit cash and credit accounts receivable in the same amount of $2,500.

B. To record the bad debt expense, we need to compute first the ending balance of the accounts receivable.

Beg $275,000 plus sales on account of $180,000 less collection $125,000, sales return of $20,000 and write off $35,000 = $275,000.

Bad debts is 10% of the Accounts receivable, so $275,000 x 10% = $27,500

Entry:

Dr bad debt expense $27,500

Cr allowance for doubtful accounts $27,500

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Assume you are in the 35 percent tax bracket and purchase a municipal bond with a yield of 5.50 percent. Use the formula present
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Answer:

8.46%

Explanation:

Calculation for the the taxable equivalent yield for this investment

Using this formula

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Let plug in the formula

Taxable equivalent yield=0.055 / (1 - 0.35)

Taxable equivalent yield=0.055/0.65

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3 years ago
Calla Company produces skateboards that sell for $56 per unit. The company currently has the capacity to produce 95,000 skateboa
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Answer:

Calla Company

Three-column comparative Income Statement:

                                                  Normal         Special order       Total

Sales Revenue                       $4,580,800         $673,200     $5,254,000

Cost of sales:

Direct materials                      $ 981,600           $158,400       $1,140,000

Direct labor                                613,500              99,000            712,500

Overhead                                  954,000              76,973         1,030,973

Selling expenses                      558,000               84,151             642,151

Administrative expenses          477,000                  890            477,890

Total costs and expenses  $ 3,584,100           $419,414      $4,003,514

Net income                           $ 996,700         $ 253,786     $1,250,486

Explanation:

a) Data and Calculations:

Annual production capacity = 95,000 units

Actual annual production and sales = 81,800 units

Special order (units) = 13,200

Selling price (normal) = $56 per unit

Special order selling price = $51 per unit

Direct materials                      $ 981,600

Direct labor                                613,500

Overhead                                  954,000

Selling expenses                      558,000

Administrative expenses          477,000

Total costs and expenses  $ 3,584,100

Three-column comparative Income Statement:

                                                  Normal         Special order       Total

Sales volume                             81,800                  13,200         95,000

Selling price                                $56                     $51    

Sales Revenue                       $4,580,800         $673,200     $5,254,000

Cost of sales:

Direct materials                      $ 981,600           $158,400       $1,140,000

Direct labor                                613,500              99,000            712,500

Overhead                                  954,000              76,973         1,030,973

Selling expenses                      558,000               84,151             642,151

Administrative expenses          477,000                  890            477,890

Total costs and expenses  $ 3,584,100           $419,414      $4,003,514

Net income                           $ 996,700         $ 253,786     $1,250,486

1. Direct materials cost per unit = $981,600/81,800 = $12

2. Direct labor cost per unit = $613,500/81,800 = $7.50

3. Variable Overhead cost = $954,000/2 = $477,000

Variable overhead cost per unit = $477,000/81,800 = $5.83129

4. Variable selling expenses = 70% of $558,000 = $390,600

Variable selling expenses per unit = $390,600/81,800 = $4.77506

Additional selling expense per unit = $6.37506 ($4.77506 + $1.60)

Selling expense for special order = 84,151($6.37506 * 13,200)

5. Administrative expenses increased by $890

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