Intermediate Accounting
9th Edition
ISBN: 9781259722660
Author: J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher: McGraw-Hill Education
expand_more
expand_more
format_list_bulleted
Videos
Textbook Question
Chapter 7, Problem 7.7E
Cash discounts; the net method
• LO7–3
[This is a variation of E 7–6 modified to focus on the net method of accounting for cash discounts.]
Harwell Company manufactures automobile tires. On July 15, 2018, the company sold 1,000 tires to the Nixon Car Company for $50 each. The terms of the sale were 2/10, n/30. Harwell uses the net method of accounting for cash discounts.
Required:
1. Prepare the
2. Prepare the journal entries to record the sale on July 15 (ignore cost of goods) and payment on August 15, 2018.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Sh25
20. The list price of an air conditioner is OMR 250. If manufacturer sells this product to a retailer for list price less 15% discount, what will be the amount of account receivable to be recorded by the manufacturer?
a.
OMR 250
b.
OMR 212.50
c.
OMR 37.50
d.
OMR 287.50
b. 8,275,000
c. 7,725,000
d. 7,875,000
PART III. PROBILEM SOLVING. Answer what is being asked. Please show your solutions.
1. Easy Company sells directly to retail customers. On January 1, 2020, the balance of the
accounts receivable was P2,070,000 while the allowance for doubtful accounts was a credit
of P78,000. The following data are gathered.
Credit Sales
Writeoffs
Recoveries
22,000
2017
11,100,000
12,250,000)
260,000
295,000
300,000
2018
37,000
36,000
2019
14,650,000
15,000,000
2020
310,000
42,000
Doubtful accounts are provided for as a percentage of credit sales. The entity calculated
the percentage annually by using the experience of the three years prior to the current year.
Required:
a. What is the percentage of credit sales to be used in computing doubtful accounts
expense for 2020?
b. What amount should be reported as doubtful expense for 2020?
c. What amount should be reported as allowance for doubtful accounts on December 31,
2020?
CS
Scanned with CamScanner
Chapter 7 Solutions
Intermediate Accounting
Ch. 7 - Prob. 7.1QCh. 7 - Prob. 7.2QCh. 7 - Prob. 7.3QCh. 7 - Prob. 7.4QCh. 7 - Prob. 7.5QCh. 7 - Prob. 7.6QCh. 7 - Distinguish between the gross and net methods of...Ch. 7 - Briefly explain the accounting treatment for sales...Ch. 7 - Explain the typical way companies account for...Ch. 7 - Briefly explain the difference between the income...
Ch. 7 - Prob. 7.11QCh. 7 - Is any special accounting treatment required for...Ch. 7 - Explain any possible differences between...Ch. 7 - Prob. 7.14QCh. 7 - What is meant by the discounting of a note...Ch. 7 - What are the key variables that influence a...Ch. 7 - Explain how the CECL model (introduced in ASU No....Ch. 7 - Prob. 7.18QCh. 7 - Prob. 7.19QCh. 7 - (Based on Appendix 7B) Marshall Companies, Inc.,...Ch. 7 - Prob. 7.21QCh. 7 - Prob. 7.1BECh. 7 - Prob. 7.2BECh. 7 - Prob. 7.3BECh. 7 - Cash discounts; gross method LO73 On December 28,...Ch. 7 - Prob. 7.5BECh. 7 - Sales re turns LO74 During 2018, its first year...Ch. 7 - Sales re turns LO74 Refer to the situation...Ch. 7 - Prob. 7.8BECh. 7 - Prob. 7.9BECh. 7 - Uncollectible accounts; balance sheet approach ...Ch. 7 - Uncollectible accounts; solving for unknown LO75,...Ch. 7 - Prob. 7.12BECh. 7 - Note receivable LO77 On December 1, 2018,...Ch. 7 - Long-term notes receivable LO74 On April 19,...Ch. 7 - Prob. 7.15BECh. 7 - Factoring of accounts receivable LO78 Refer to...Ch. 7 - Prob. 7.17BECh. 7 - Discounting a note LO78 On March 31, Dower...Ch. 7 - Receivables turnover LO78 Camden Hardwares credit...Ch. 7 - Prob. 7.20BECh. 7 - Prob. 7.21BECh. 7 - Impairments of Accounts Receivable Appendix 7B...Ch. 7 - Credit Losses on Accounts Receivable (CECL Model) ...Ch. 7 - Prob. 7.1ECh. 7 - Prob. 7.2ECh. 7 - Prob. 7.3ECh. 7 - Prob. 7.4ECh. 7 - Trade and cash discounts; the gross method and the...Ch. 7 - Prob. 7.6ECh. 7 - Cash discounts; the net method LO73 [This is a...Ch. 7 - Sales returns LO74 Halifax Manufacturing allows...Ch. 7 - Prob. 7.9ECh. 7 - Prob. 7.10ECh. 7 - Uncollectible accounts; allowance method; balance...Ch. 7 - Uncollectible accounts; allowance method and...Ch. 7 - Uncollectible accounts; allowance method; solving...Ch. 7 - Note receivable LO77 On June 30, 2018, the...Ch. 7 - Noninterest-bearing note receivable LO77 [This is...Ch. 7 - Long-term notes receivable LO77 On January 1,...Ch. 7 - Prob. 7.17ECh. 7 - Prob. 7.18ECh. 7 - Prob. 7.19ECh. 7 - Factoring of accounts receivable with recourse ...Ch. 7 - Factoring of accounts receivable with recourse...Ch. 7 - Discounting a note receivable LO78 Selkirk...Ch. 7 - Concepts; terminology LO71 through LO78 Listed...Ch. 7 - Receivables; transaction analysis LO73, LO75...Ch. 7 - Prob. 7.25ECh. 7 - Prob. 7.26ECh. 7 - Prob. 7.27ECh. 7 - Prob. 7.28ECh. 7 - Prob. 7.29ECh. 7 - Prob. 7.30ECh. 7 - Impairments of Notes Receivable Appendix 7B At...Ch. 7 - Prob. 7.32ECh. 7 - Prob. 7.33ECh. 7 - Prob. 7.34ECh. 7 - Uncollectible accounts; allowance method; income...Ch. 7 - Uncollectible accounts; Amdahl LO75 Real World...Ch. 7 - Bad debts; Nike, Inc. LO75 Real World Financials...Ch. 7 - Uncollectible accounts LO75, LO76 Raintree...Ch. 7 - Prob. 7.5PCh. 7 - Notes receivable; solving for unknowns LO77...Ch. 7 - Prob. 7.7PCh. 7 - Prob. 7.8PCh. 7 - Prob. 7.9PCh. 7 - Prob. 7.10PCh. 7 - Prob. 7.11PCh. 7 - Accounts and notes receivable; discounting a note...Ch. 7 - Prob. 7.13PCh. 7 - Prob. 7.14PCh. 7 - Prob. 7.15PCh. 7 - Prob. 7.16PCh. 7 - Prob. 7.17PCh. 7 - Prob. 7.1BYPCh. 7 - Prob. 7.2BYPCh. 7 - Prob. 7.3BYPCh. 7 - Real World Case 74 Sales returns; Green Mountain...Ch. 7 - Ethics Case 75 Uncollectible accounts LO75 You...Ch. 7 - Prob. 7.6BYPCh. 7 - Prob. 7.7BYPCh. 7 - Prob. 7.8BYPCh. 7 - Prob. 7.9BYPCh. 7 - Prob. 7.10BYPCh. 7 - Prob. 7.11BYPCh. 7 - Prob. 1CCTC
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Question 5 a. Cash discounts will normally appear on an invoice in terms such as 2/10 n30. What does this mean for an invoice of value GH¢10,000? b. Extracts from the profit and loss account for the year and the balance sheet as at the end of the year for NORA Enterprise are shown below. Assume all sales and purchases are on credit terms. Item Sales Amount GH¢ 200,000 Cost of goods sold 150,000 Purchases 120,000 Accounts Receivable 35,500 Accounts Payable 18,000 Inventory Finished goods 15,000 Work in progress 28,000 37,000 Raw materials i. Calculate the overall inventory turnover period and ratio. ii. Calculate the accounts receivable turnover period and ratio. iii. Compute the accounts payable turn over period and ratio. iv. What do the values computed in (a), (b) and (c) mean? v. What is the length of the operating cycle and the cash conversion cycle?arrow_forwardMF2 9 Purchased merchandise from Keene Co. for $9,100 under credit terms of 2/15, n/60, FOB destination. Analysis Component: As the senior purchaser for Belton Company, you are concerned that the purchase discounts you have negotiated are not being taken advantage of by the accounts payable department. Calculate the cost of the lost discount regarding the July 9 purchase. Assume a 6% interest rate. (Do not round intermediate calculations. Round your final answer to 2 decimal places. Assume 365 days a year.)arrow_forwardDon't Use AIarrow_forward
- Question 6 of 10 The following are two independent situations. (Ignore cost of goods sold entries.) (a) On March 3, Kitselman Appliances sells $750,000of its receivables to Pharoah Inc. Pharoah assesses a finance charge of 3% of the amount of receivables sold. Prepare the entry on Kitselman Appliances' books to record the sale of the receivables. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter o for the amounts.) Date Mar. 3 Date Account Titles May 10 Debit (b) On May 10, Cullumber Company sold merchandise for $7.200 and accepted the customer's America Bank MasterCard. America Bank charges a2% service charge for credit card sales. Prepare the entry on Cullumber Company's books to record the sale of merchandise. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the…arrow_forwardbased on that solution just want to ask how find gross profit and net profit？arrow_forwardDon't Use AIarrow_forward
- Skyline Inc. Please refer to the picturearrow_forwardExercise 6.10 (Algo) Cash Discounts (LO6-6) Golf World sold merchandise to Mulligans for $93,000, offering terms of 1/15, n/30. Mulligans paid for the merchandise within the discount period. Both companies use perpetual inventory systems. a. Prepare journal entries in the accounting records of Golf World to account for this sale and the subsequent collection. Assume the original cost of the merchandise to Golf World had been $60,450. b. Prepare journal entries in the accounting records of Mulligans to account for the purchase and subsequent payment. Mulligans records purchases of merchandise at net cost. c. Assume that, because of a change in personnel, Mulligans failed to pay for this merchandise within the discount period. Prepare the journal entry in the accounting records of Mulligans to record payment after the discount period.arrow_forwardAnswer #3 6695,000 I need solution for #3 thank youarrow_forward
- P6.8arrow_forward18. Merchandise subject to terms 1/10, n/30, FOB shipping point, is sold account to a customer for P15,000. The seller paid transportation costs ot P1,000 and issued a credit memorandum for P5,000 prior to payment. What i the amount of the cash discount allowable? a. P160 b. P150 c. P140 d. P100arrow_forward11:/13 Problem 2-2U S) William Company operates a customer loyalty program. T entity grants loyalty points for goods purchased. The loyalty points can be used by the customers in exchane for goods of the entity. The pointa have no expiry date. During 2020, the entity issued 100,000 award credits and expects that 80% of these award credits shall be redeemed The total stand-alone selling price of the award credita granted is reliably measured at P2,000,000. In 2020, the entity sold goods to customers for a total consideration of P8,000,000 based on stand-alone selling price. The award credits redeemed and the total award credits expected to be redeemed each year are as follows: Redeemed Expected to be redeemed 2020 2021 30,000 15,000 80% 90% 1. What is the revenue from points for 2020? 1,600,000 b. a. 1.500,000 600,000 d. 480,000 2. What is the revenue from points for 2021? a. 240,000 b. 200,000 120,000 04.29arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
IAS 29 Financial Reporting in Hyperinflationary Economies: Summary 2021; Author: Silvia of CPDbox;https://www.youtube.com/watch?v=55luVuTYLY8;License: Standard Youtube License