Chapter 5, Problem 5.62AP

(Learning Objectives 1, 2, 3, 4, 5: Apply GAAP for proper revenue recognition; account for sales allowances; account for sales discounts; account for accounts receivable; write off account; estimate uncollectible account expense)

Bowerston Variety Store had the following balances as of November 1·

Accounts Receivable	$5,100
Allowance for Uncollectible Accounts	$360

The following selected transactions occurred at Bowerston Variety Store during the month of November:

November 3	Sold $300 of merchandise to Martino’s Inc., which paid for the items in cash. The items cost Bowerston $120.
November 5	Sold $600 of merchandise to Liberry Co., which paid by credit card, The credit card company charges Bowerston a fee of 2% on credit card sales. Bowerston’s cost of this merchandise was $245.
November 10	Sold $1,300 of merchandise to Willow Creek on account, Terms were 2/10, net 30. Bowerston’s cost of this merchandise was $500.
November 11	Sold $2,000 of merchandise to Amherst Shapes on account. Terms were 2/10, net 30. Bowerston’s cost of this merchandise was $900.
November 12	Sold $900 of merchandise to Black Riser Inc., on account. Terms were 2/10, net 30. Bowerston’s cost of this merchandise was $387.
November 18	Willow Creek reported that some of the merchandise received was in a different color than ordered so it returned $150 of the merchandise. The cost to Bowerston was $58.
November 20	Amherst Shoppes pa id the balance of what it owed for the purchase on November 11.
November 22	Black River Inc., returned $200 of the merchandise for a refund. Bowerston’s cost of the returned merchandise was $86.
November 22	Black River Inc., paid the remaining balance owed for the purchase on November 12.
November 23	Sold $5,000 of merchandise to Charleston Co. on account. Terms were 2/10, net 30. Bowerston’s cost of this merchandise was $2,000.
November 25	Willow Creek paid the balance of what it owed for the purchase on November 10.
November 26	Discovered that Ema Enterprises, a customer owing $150 from a July transaction, declared bankruptey and there is no chance of collection. Wrote off the balance of Ema’s account.
November 27	Sold $700 of merchandise to Denis’s One-Stop-Shop on account. Terms were 2/10, net 30. Bowerston’s cost of this merchandise was $245.
November 1-30	Sales on account during the month of November for transactions not listed individually totaled $7,200, Cost of goods sold for these sales totaled $3,000.
November 1-30	Credit card sales on account during the month of November for transactions not listed individually totaled $2,500. The credit card company charges Bowerston a fee of 2% on credit card sales. Cost of goods sold for these sales totaled $900.
November 1-30	Cash collections on account during the month of November for transactions not listed individually totaled $4,500.(No discount were taken by these customer.)
November 30	Bowerston made the adjusting entries for the month to accrue for estimated future returns. Bowerstou estimates that 5% of total sales will be returned, Bowerston assumes that cosr of goods sold is 40% of sales.
November 30	Bowerston made an adjusting entry to estimate uncollectible account expense for the month of November. Bowerston estimates its uncollectible-account expense as 1% of total credit (on account) sales for the month.

Requirements

1. Record Bowerston’s November transactions, including the cost of goods sold entries for each sale.

2. Calculate the net realizable value of accounts receivable as of November 30.