The following data were selected from the records of Sharkim Company for the yea

Question

The following data were selected from the records of Sharkim Company for the year ended December 31, 2012.

Balances January 1, 2012:
Accounts receivable (various customers) $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 2012
a. Sold merchandise for cash, $227,000.
b. Sold merchandise to Abbey Corp; invoice price, $12,000.
c. Sold merchandise to Brown company; invoice price, $23,500
d. Abbey 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, Abbey returned one defective unit and received a cash refund
g. Collected $78,400 cash from customer sales on credit in prior year, all within the discount periods
h. Three days after purchase date, Brown returned seven of the units purchased in (c) and received account credit.
i. Brown paid its account in full within the discount period
j. Sold merchandise to Decca Corporation; invoice price, $18,500
k. Cavendish paid its account in full after the discount period.
l. Wrote off a 2008 account of $2,400 after deciding that the amount would never be collected
m. The estimated bad debt rate used by the company was 3 percent of credit sales net of returns

Required:
1. Give the necessary 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 computation for each entry.

Explanation / Answer

a. Sold merchandise for cash, $227,000. Cash $227,000 Sales $227,000 b. Sold merchandise to Abbey Corp; invoice price, $12,000. Accounts receivable $12,000 Sales $12,000 c. Sold merchandise to Brown company; invoice price, $23,500 Accounts receivable $23,000 Sales $23,000 d. Abbey paid the invoice in (b) within the discount period. Cash $11,760 Sales return and discounts $240 Accounts receivable $12,000 (Discount 2% on $12,000 = 240) e. Sold merchandise to Cavendish Inc; invoice price, $26,000. Accounts receivable $26,000 Sales $26,000 f. Two days after paying the account in full, Abbey returned one defective unit and received a cash refund Sales return and discounts $500 Cash $500 g. Collected $78,400 cash from customer sales on credit in prior year, all within the discount periods Cash $78,400 Sales return and discounts $1,600 Accounts receivable $80,000 (To calculate discount – Total sales value = (78,400 ÷ 98) x 100 = $80,000 Discount = 80,000 – 78400 = 1600) h. Three days after purchase date, Brown returned seven of the units purchased in (c) and received account credit. Sales return and discounts $3,500 Accounts receivable $3,500 ( 7 units at $500 each = $3,500) i. Brown paid its account in full within the discount period Cash $19,600 Sales return and discounts $400 Accounts receivable $20,000 ( Total sales = $23,500 Less return $3,500 Net sales $20,000 Cash discount 2% = $400 Net cash received $19,600) j. Sold merchandise to Decca Corporation; invoice price, $18,500 Accounts receivable $18,500 Sales $18,500 k. Cavendish paid its account in full after the discount period. Cash $25,480 Sales return and discount $520 Accounts receivable $26,000 l. Wrote off a 2008 account of $2,400 after deciding that the amount would never be collected m. Allowance for doubtful accounts 2,400 Accounts receivable $2,400 The estimated bad debt rate used by the company was 3 percent of credit sales net of returns Allowance for doubtful debts $1,237 Bad debts $1,237 Accounts receivable Balance in the beginning $116,000 Add credit sales $ 80,000 Total receivable $196,000 Less receipts $141,500 Balance $ 54,500 Less Bad debts $ 2,400 Ending Balance $52,100 Allowance for doubtful debts 3% = $1,563 Allowance for doubtful debts Beginning balance $5,200 Less Bad debts $2,400 Net available $2,800 Required $1,563 Written back $1,263

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.