1 answer

I don't know how to solve problem 7p from Chapter 6 , I would highly appreciate...

Question:

I don't know how to solve problem 7p from Chapter 6 , I would highly appreciate a detailed answer key! :)

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) $ 124,000
Allowance for doubtful accounts 10,000

In the following order, except for cash sales, the company sold merchandise and made collections on credit terms 2/10, n/30 (assume a unit sales price of $500 in all transactions and use the gross method to record sales revenue).

Transactions during current year

a. Sold merchandise for cash, $238,000.

b. Sold merchandise to R. Smith; invoice price, $9,000.

c. Sold merchandise to K. Miller; invoice price, $32,000.

d. Two days after purchase date, R. Smith returned one of the units purchased in (b) and received account credit.

e. Sold merchandise to B. Sears; invoice price, $23,000.

f. R. Smith paid his account in full within the discount period.

g. Collected $88,000 cash from customer sales on credit in prior year, all within the discount periods.

h. K. Miller paid the invoice in (c) within the discount period.

i. Sold merchandise to R. Roy; invoice price, $26,500.

j. Three days after paying the account in full, K. Miller returned seven defective units and received a cash refund.

k. After the discount period, collected $4,000 cash on an account receivable on sales in a prior year.

l. Wrote off a prior year account of $4,000 after deciding that the amount would never be collected.

m. The estimated bad debt rate used by the company was 4.5 percent of credit sales net of returns.

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.)


Answers

Journal Entry
S. No. Account Tittle Debit Credit
a. Cash $2,38,000
Sales Revenue $2,38,000
b. Account Receivable $9,000
Sales Revenue $9,000
c. Account Receivable $32,000
Sales Revenue $32,000
d. Sales Return & Allowance $500
Account Recievable $500
e. Account Receivable $23,000
Sales Revenue $23,000
f. Cash $8,330
Sales Discount (8500*2%) $170
Account Receivable $8,500
g. Cash $88,000
Sales Discount $1,796
Account Receivable( 88000/0.98) $89,796
h. Cash $31,360
Sales Discount (32000*2%) $640
Account Receivable $32,000
i. Account Receivable $26,500
Sales Revenue $26,500
j. Sales Return & Allowance (7*500) $3,500
Cash $3,430
Sales Discount (3500*2%) $70
k Cash $4,000
Account receivable $4,000
l. Allowance for Doubtful Account $4,000
Account Receivable $4,000
m. Bad Debt Expense $3,893
Allowance for Doubtful Account (w/Note) $3,893
Working Note
Credit Sales (9000+32000+23000+26500) $90,500
Less: Sales Return (500+3500) -$4,000
Net Sales Revenue $86,500
Estimated Bad Debt Rate 4.50%
Bad Debt Expense $3,893
.

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