Financial Accounting, 9/e 6-21
E6–27 (Supplement)
November 20
Cash (+A) ………………………………………………………….. 441
Credit card discount (+XR, –R, –SE) ……………………… 9
Sales revenue (+R, +SE) ……………………………. 450
To record credit card sale.
November 30:
Sales returns and allowances (+XR, –R, –SE) ………… 600
Accounts receivable (Customer D) (–A)………… 600
To record return of defective goods, $7,200 x 1/12 = $600.
December 30:
Cash (+A) ………………………………………………………….. 2,800
Accounts receivable (Customer C) (–A)………… 2,800
To record collection after the discount period.
Sales revenue ($450 + $2,800 + $7,200) ……………………………. $10,450
PROBLEMS
P6–1.
Req. 1
Sales
Revenue
Sales Discounts
(taken)
Sales Returns
and Allowances
Bad Debt
Expense
(a)
+235,000
NE
NE
NE
(b)
+11,500
NE
NE
NE
(c)
+26,500
NE
NE
NE
(d)
NE
NE
NE
(e)
+24,000
NE
NE
NE
(g)
NE
NE
NE
(h)
NE
+530
NE
NE
(i)
+19,000
NE
NE
NE
(j)
NE
–70
+3,500
NE
(k)
NE
NE
NE
NE
(l)
NE
NE
NE
NE
(m)
NE
NE
NE
Total
*$98,000 ÷ (1 ─ .02) = $100,000 gross sales; $100,000 x .02 = $2,000
**Credit sales ($11,500 + $26,500 + $24,000 + $19,000) . $81,000
Less: Sales returns ($500 + $3,500) ……………………….. 4,000
Net sales revenue ………………………………………………….. 77,000
Estimated bad debt rate …………………………………………. x 1.5%
Bad debt expense ………………………………………………….. $1,155
Req. 2
Financial Accounting, 9/e 6-23
P6–2.
1. Bad debt expense (+E, –SE) …………………………………………….. 42
Allowance for doubtful accounts (+XA, –A) ………………… 42
End-of-period bad debt expense estimate.
2. Year 2 …………………………………. $132 + $187 – $36 = $283
Year 1 …………………………………. $128 + $4 – $0 = $132
P6–3.
Req. 1
Aging Analysis of Accounts Receivable
Customer
Total
Receivables
(a) Not Yet
Due
(b) Up to One
Year Past
Due
(c) More Than
One Year
Past Due
B. Brown…………..
$ 6,200
$6,200
D. Donalds………..
7,000
N. Napier………….
7,000
S. Strothers………
24,500
T. Thomas…………
4,000
$48,700
$6,200
Req. 2
Aging Schedule—Estimated Amounts Uncollectible
Age
Amount of
Receivables
Estimated
Uncollectible
Percentage
Estimated
Amount
Uncollectible
a.
Not yet due……………………
$15,000
3%
$ 450
b.
Up to one year past due…….
27,500
9%
2,475
c.
Over one year past due……..
1,736
Balance before adjustment
Bad Debt Expense for the year
$3,741
Req. 4
Income statement:
Operating expenses
Bad debt expense …………………………………………………. $3,741
Financial Accounting, 9/e 6-25
P6–4.
Req. 1
TUNGSTEN COMPANY, INC.
Income Statement
For the Year Ended December 31, Current Year
Net sales revenue ($147,100 − $5,600 − $6,400) ……………. $135,100
Cost of goods sold………………………………………………………. 78,400
Gross profit on sales …………………………………………………… 56,700
Operating expenses:
Req. 2
Receivables
=
Net Sales
=
$135,100
=
8.89
Turnover
Average Net Trade
Accounts Receivable
$15,200*
P6–5.
Req. 1
JEFFERSON COMPANY
Bank Reconciliation, April 30, Current Year
Company’s Books
Bank Statement
Ending balance per Cash
account …………………….
$23,900
Ending balance per bank
statement …………………
$26,070
4,400
210
*$41,500 – $37,100 = $4,400.
Req. 2
(1) Cash (+A) ……………………………………………………………….. 1,180
Interest revenue (+R, +SE) ………………………………. 1,180
Interest collected.
Bank service charges deducted from bank statement.
These entries are necessary because of the changes to the regular Cash account that
have not yet been recorded by the company. The bank already has recorded them in its
accounts. The Cash account (and the other accounts in the entries) must be brought up
to date for financial statement purposes.
Req. 3
Balance in regular Cash account ……………………………………………… $24,870
Financial Accounting, 9/e 6-27
P6–6.
Req. 1
Comparison of deposits listed in the Cash account with deposits listed on the bank
statement reveals a $5,200 deposit in transit on August 31.
Req. 3 ALLISON COMPANY
Bank Reconciliation, August 31, Current Year
Company’s Books
Bank Statement
Ending balance per Cash
account …………………….
$20,370
Ending balance per bank
statement …………………
$18,190
5,200
120
790
Req. 4
(1) Cash (+A) ……………………………………………………………….. 2,350
Interest revenue (+R, +SE) ………………………………. 2,350
Interest collected.
Req. 5
Current Assets:
Cash …………………………..…………………………………………………… $22,600
P6–7. (Supplement)
Req. 1
(c) Accounts receivable (K. Miller) (+A) …………………….. 26,500
Sales revenue (+R, +SE) ………………………….. 26,500
Credit sale, $26,500.
(d) Sales returns and allowances (+XR, –R, –SE) ………. 500
Accounts receivable (R. Smith) (–A) …………… 500
Sale return, 1 unit @ $500.
(g) Cash (+A) ………………………………………………………… 98,000
Sales discounts (+XR, –R, –SE) ………………………….. 2,000
Accounts receivable (prior year) (–A) …………. 100,000
Collected receivables of prior year, all within
discount periods $98,000 ÷ .98 = $100,000.
(h) Cash (+A) ………………………………………………………… 25,970
Sales discounts (+XR, –R, –SE) ………………………….. 530
Accounts receivable (K. Miller) (–A) ……………. 26,500
Collected receivable within the discount period
$26,500 x .98 = $25,970.
Financial Accounting, 9/e 6-29
P6–7. (continued)
(j) Sales returns and allowances (+XR, –R, –SE) ………. 3,500
Cash (–A) ……………………………………………….. 3,430
Sales discounts (–XR, +R, +SE) ………………… 70
Sales return, 7 units @ $500 less sales discounts taken
= $3,500 x .98.
(m) Bad debt expense (+E, –SE) ………………………………. 1,155
Allowance for doubtful accounts (+XA, –A) ….. 1,155
To adjust for estimated bad debt expense
Credit sales ($11,500 + $26,500 + $24,000 + $19,000) .. $81,000
Less: Sales returns ($500 + $3,500) ……………………….. 4,000
Net sales revenue ………………………………………………….. 77,000
Estimated bad debt rate …………………………………………. x 1.5%
Bad debt expense …………………………………………… $1,155
.
Req. 2
ALTERNATE PROBLEMS
AP6–1.
Req. 1
Sales
Revenue
Sales Discounts
(taken)
Sales Returns
and Allowances
Bad Debt
Expense
(a)
+227,000
NE
NE
NE
(b)
+12,000
NE
NE
NE
(c)
+23,500
NE
NE
NE
(d)
NE
NE
NE
(e)
+26,000
NE
NE
NE
(f)
NE
NE
(g)
NE
NE
NE
(h)
NE
NE
NE
(i)
NE
NE
NE
(j)
+18,500
NE
NE
NE
(k)
NE
NE
NE
NE
(l)
NE
NE
NE
NE
(m)
NE
NE
NE
Total
+$4,000
* [($88,200/.98) x .02] = $1,800
**Credit sales ($12,000 + $23,500 + $26,000 + $18,500) . $80,000
Less: Sales returns ($500 + $3,500) ……………………….. 4,000
Net sales revenue ………………………………………………….. $76,000
Estimated bad debt rate …………………………………………. x 4%
Bad debt expense ………………………………………………….. $3,040
Req. 2
Income statement:
Financial Accounting, 9/e 6-31
AP6–2.
1. Bad debt expense (+E, –SE) …………………………………………….. 6,014
Allowance for doubtful accounts (+XA, –A) ………………… 6,014
End of period bad debt expense estimate.
2.
Allowances for
Doubtful
Accounts
Balance at
Beginning
of Year
Additions
Charged to
Costs and
Expenses
Deductions
from
Reserve
Balance at
End
of Year
Year 3
$1,108
$6,014
$5,941
$1,181
Year 1
Year 3
Allowance for Doubtful Accounts
1,108
Beg. bal.
Write-offs
5,941
6,014
Bad debt exp.
1,181
End. bal.
Year 2
Allowance for Doubtful Accounts
2,406
Beg. bal.
1,108
End. bal.
Year 1
Allowance for Doubtful Accounts
2,457
Beg. bal
2,406
Ending bal.