Financial Accounting
9th Edition
ISBN: 9781259738692
Author: Libby
Publisher: MCG
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Chapter 6, Problem 6.1AP
Reporting Net Sales and Expenses with Discounts, Returns, and
The following data were selected from the records of Sharkim Company for the year ended December 31, current year.
| Balances January 1, current year: | |
| $116,000 | |
| Allowance for doubtful accounts | 5,200 |
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 2014
- a. Sold merchandise for cash, $227,000.
- b. Sold merchandise to Karen Corp.; invoice price, $12,000.
- c. Sold merchandise to White Company; invoice price, $23,500.
- d. Karen paid the invoice in (b) within the discount period.
- e. Sold merchandise to Cavendish Inc.; invoice price, $26,000.
- f. Two days after paying the account in full, Karen returned one defective unit and received a cash refund.
- g. Collected $88,200 cash from customer sales on credit in prior year, all within the discount periods.
- h. Three days after purchase date, White returned seven of the units purchased in (c) and received account credit.
- i. White paid its account in full within the discount period.
- j. Sold merchandise to Delta Corporation; invoice price, $18,500.
- k. Cavendish (e) paid its account in full after the discount period.
- l. Wrote off a prior year account of $2,400 after deciding that the amount would never be collected.
- m. The estimated bad debt rate used by the company was 4 percent of credit sales net of returns.
Required:
- 1. Using the following categories, indicate the effect of each listed transaction, including the write-off of the uncollectible account and the
adjusting entry for estimated bad debts (ignore cost of goods sold). Indicate the sign and amount of the effect or use “NE” to indicate “no effect.” The first transaction is used as an example.(a)
|
|
|
|
| +227,000 | NE | NE | NE |
2. Show how the accounts related to the preceding sale and collection activities should be reported on the 2014 income statement. (Treat sales discounts as a contra-revenue.)
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The following information is from the annual financial statements of Raheem Company,
Year 2
$ 335,280
41,400
Net sales
Accounts receivable, net (year-end)
(1) Compute its accounts receivable turnover for Year 2 and Year 3.
(2) Assuming its competitor has a turnover of 11, is Raheem performing better or worse at collecting receivables than its competitor?
Complete this question by entering your answers in the tabs below.
Year 3
$ 405,140
44,800
Required 1 Required 2
Compute its accounts receivable turnover for Year 2 and Year 3.
Year 2:
Year 3:
Choose Numerator:
Accounts Receivable Turnover
Choose Denominator
7
1
1
Year 1
$ 388,000
34,800
W
Accounts Receivable Turnover.
Accounts receivable tumover
times
times
a
Chapter 6 Solutions
Financial Accounting
Ch. 6 - Prob. 1QCh. 6 - What is gross profit or gross margin on sales? In...Ch. 6 - What is a credit card discount? How does it affect...Ch. 6 - Prob. 4QCh. 6 - Prob. 5QCh. 6 - Differentiate accounts receivable from notes...Ch. 6 - Which basic accounting principle is the allowance...Ch. 6 - Using the allowance method, is bad debt expense...Ch. 6 - Prob. 9QCh. 6 - Prob. 10Q
Ch. 6 - Prob. 11QCh. 6 - Prob. 12QCh. 6 - Prob. 13QCh. 6 - Prob. 14QCh. 6 - Briefly explain how the total amount of cash...Ch. 6 - Prob. 16QCh. 6 - Sales discounts with terms 2/10, n/30 mean: a. 10...Ch. 6 - Gross sales total 300,000, one-half of which were...Ch. 6 - A company has been successful in reducing the...Ch. 6 - When a company using the allowance method writes...Ch. 6 - You have determined that Company X estimates bad...Ch. 6 - Prob. 6MCQCh. 6 - Which of the following is not a step toward...Ch. 6 - When using the allowance method, as bad debt...Ch. 6 - Which of the following best describes the proper...Ch. 6 - Prob. 10MCQCh. 6 - Prob. 6.1MECh. 6 - Prob. 6.2MECh. 6 - Recording Bad Debts Prepare journal entries for...Ch. 6 - Prob. 6.4MECh. 6 - Determining the Effects of Credit Policy Changes...Ch. 6 - Prob. 6.6MECh. 6 - Prob. 6.7MECh. 6 - Prob. 6.1ECh. 6 - Reporting Net Sales with Credit Sales, Sales...Ch. 6 - Reporting Net Sales with Credit Sales, Sales...Ch. 6 - Determining the Effects of Credit Sales, Sales...Ch. 6 - Prob. 6.5ECh. 6 - Reporting Bad Debt Expense and Accounts Receivable...Ch. 6 - Recording Bad Debt Expense Estimates and...Ch. 6 - Recording Bad Debt Expense Estimates and...Ch. 6 - Prob. 6.9ECh. 6 - Prob. 6.10ECh. 6 - Computing Bad Debt Expense Using Aging Analysis...Ch. 6 - Recording and Reporting a Bad Debt Estimate Using...Ch. 6 - Recording and Reporting a Bad Debt Estimate Using...Ch. 6 - Prob. 6.14ECh. 6 - Prob. 6.15ECh. 6 - Inferring Bad Debt Write-Offs and Cash Collections...Ch. 6 - Inferring Bad Debt Write-Offs and Cash Collections...Ch. 6 - Prob. 6.18ECh. 6 - Prob. 6.19ECh. 6 - Prob. 6.20ECh. 6 - Recording, Reporting, and Evaluating a Bad Debt...Ch. 6 - Prob. 6.22ECh. 6 - Prob. 6.23ECh. 6 - Interpreting tho Effects of Salos Declines and...Ch. 6 - Prob. 6.25ECh. 6 - Prob. 6.26ECh. 6 - Prob. 6.27ECh. 6 - Prob. 6.1PCh. 6 - Recording Bad Debts and Interpreting Disclosure of...Ch. 6 - Determining Bad Debt Expense Based on Aging...Ch. 6 - Preparing an Income Statement and Computing the...Ch. 6 - Prob. 6.5PCh. 6 - Prob. 6.6PCh. 6 - Prob. 6.7PCh. 6 - Reporting Net Sales and Expenses with Discounts,...Ch. 6 - Prob. 6.2APCh. 6 - Determining Bad Debt Expense Based on Aging...Ch. 6 - Prob. 6.4APCh. 6 - Prob. 6.5APCh. 6 - Prob. 6.1CONCh. 6 - Finding Financial Information Refer to the...Ch. 6 - Finding Financial Information Refer to the...Ch. 6 - Prob. 6.3CPCh. 6 - Prob. 6.4CPCh. 6 - Prob. 6.5CP
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