Question

Transactions during current year Sold merchandise for cash, $236,000. Sold merchandise to R. Smith; invoice price, $8,500. Sold merchandise to K. Miller; invoice price, $36,000. Two days after purchase date, R. Smith returned one of the units purchased in (b) and received account credit. Sold merchandise to B. Sears; invoice price, $25,000. R. Smith paid his account in full within the discount period. Collected $95,000 cash from customer sales on credit in prior year, all within the discount periods. K. Miller paid the invoice in (c) within the discount period. Sold merchandise to R. Roy; invoice price, $17,500. Three days after paying the account in full, K. Miller returned seven defective units and received a cash refund. After the discount period, collected $6,000 cash on an account receivable on sales in a prior year. Wrote off a prior year account of $5,000 after deciding that the amount would never be collected. The estimated bad debt rate used by the company was 1.5 percent of credit sales net of returns. Required: 1. Prepare the journal entries for these transactions, including the write-off of the uncollectible account and the adjusting entry for estimated bad debts. Do not record cost of goods sold. Show computations for each entry. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your final answers to nearest whole dollar amount.)

Answer 1

Answer:

JOURNAL ENTRIES

a) Debit Bank $236,000 Credit Revenue $236,000

b) Debit Accounts Receivables $8,500 Credit Revenue $8,500

c) Debit Accounts Receivables $36,000 Credit Revenue $36,000

d) Debit Sales Allowances and Returns $500 Credit Accounts Receivables $500

e) Debit Accounts Receivables $25,000 Credit Revenue $25,000

f) Debit Bank $7,680 Debit Discount Allowed $320 Credit Accounts Receivable $8,000

g) Debit Bank $95,000 Debit Discount Allowed $3,958 Credit Accounts Receivable $98,958

h) Debit Bank $34,560 Debit Discount Allowed $1,440 Credit Accounts Receivable $36,000

i) Debit Accounts Receivable $17,500 Credit Revenue $17,500

j) Debit Sales Allowances and Returns $3,500 Credit Bank $3,500

k) Debit Bank $6,000 Credit Accounts Receivable $6,000

l) Debit Bad Debts $5,000 Credit Accounts Receivable $5,000

m) Debit Provision for bad debts $3,755 Credit Provision for Bad Debt Adjustment $3,755

CALCULATIONS

j) 7*500 =3500

m) Net Sales = 8,500 + 36,000 - 500 + 25,000 - 3,500 + 17,500 =  $83,000

    Provision for bad debts = $83,000 * 1.5% = $1,245

Provision for Bad debt Adjustment = $5,000 - $1,245 = $3,755 (income)

Net Account receivable = 121000 + 8,500 + 36,000 - 500 + 25,000 - 8,000 - 98,958 - 36,000 -6,000 - 5,000 + 17,500 = 53,542

Explanation:

The Question is incomplete. Here is the missing information :

[The following information applies to the questions displayed below.]

The following data were selected from the records of Sykes Company for the year ended December 31, Current Year.

Balances January 1, Current Year  

Accounts receivable (various customers) $ 121,000

Allowance for doubtful accounts  5,000

In the following order, except for cash sales, the company sold merchandise and made collections on credit terms 4/10, n/30 (assume a unit sales price of $500 in all transactions and use the gross method to record sales revenue).