Financial Accounting, 8th Edition
Financial Accounting, 8th Edition
8th Edition
ISBN: 9780078025556
Author: Robert Libby, Patricia Libby, Daniel Short
Publisher: McGraw-Hill Education
Question
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Chapter 6, Problem 8P
To determine

Prepare the journal entries for each of the transactions.

Expert Solution
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Explanation of Solution

Sales are an activity of selling the merchandise inventory of a business.

Prepare the journal entry.

DateAccount titles and explanationDebit ($)Credit ($)
(a)Cash235,000 
 Sales revenue  235,000
 (To record the sale of merchandise for cash)  
 
(b)Accounts receivable11,500 
 Sales revenue  11,500
 (To record the sale of merchandise on account)  
 
(c)Accounts receivable26,500 
 Sales revenue  26,500
 (To record the sale of merchandise on account)  
 
(d)Sales returns and allowances500 
        Accounts receivable 500
 (To record the sales return and allowance)  
 
(e)Accounts receivable24,000 
 Sales revenue  24,000
 (To record the sale of merchandise on account)  
 
(f)Cash10,780 (2) 
 Sales discounts220 (1) 
 Accounts receivable 11,000
 (To record the collection of cash on account within the period)  
 
(g)Cash98,000 
 Sales discounts2,000 (4) 
 Accounts receivable 100,000 (3)
 (To record the collection of cash on account within the period)  
 
(h)Cash25,970 (6) 
 Sales discounts530 (5) 
 Accounts receivable 26,500
 (To record the collection of cash on account within the period)  
 
(i)Accounts receivable19,000 
 Sales revenue  19,000
 (To record the sale of merchandise on account)  
 
(j)Sales returns and allowances3,500 (7) 
           Cash 3,430 (9)
           Sales discounts 70 (8)
 (To record the sales returns and allowances)  
 
(k)Cash6,000 
        Accounts receivable 6,000
 (To record the collection of cash on account after the period)  
 
(l)Allowance for doubtful account 3,000 
 Account receivable  3,000
 (To record the write-off of uncollectible account receivable )  
 
(m)Bad debt expense1,155 (10) 
     Allowance for doubtful accounts  1,155
 (To record the bad debt expense)  

Table (1)

Working Notes:

Calculate sales discount of 2% for the amount of $11,000 collected from R.

Sales discount = Sales × 2% discount= $11,000×2%= $220 (1)

Determine cash collected from R.

Cash = Sales revenue – Credit card discounts=$11,000$220(1)=$10,780 (2)

Calculate the total accounts receivable amount.

Accountsreceivable=$98,00098×100=100,000 (3)

Determine sales discount given to customer.

Sales discount = Account receivable – Cash received=$100,000(3)$98,000=$2,000 (4)

Calculate sales discount of 2% for the amount of $26,500 collected from M.

Sales discount = Sales × 2% discount= $26,500×2%= $530 (5)

Determine cash collected from M.

Cash = Sales revenue – Credit card discounts=$26,500$530(5)=$25,970 (6)

Calculate the amount of sales returns made from M.

Sales return =Number of items return×Unit sales price=7×$500= $3,500 (7)

Calculate sales discount of 2% for the amount of $3,500.

Sales discount = Sales return × 2% discount= $3,500(7)×2%= $70 (8)

Determine cash returned to M.

Cash = Sales return – Sales discounts=$3,500(7)$70(8)=$3,430 (9)

Calculate the bad debt expense.

Bad debt expense = NetSales×1.5% Bad debt rate= $77,000(11)×1.5%= $1,155 (10)

Calculate the net sales.

Calculate net sales = Credit salesSales returns[($11,500+$26,500+$24,000+$19,000)($500+$3,500)]= $81,000$4,000=$77,000 (11)

2.

To determine

Show the accounts related to the preceding sale and collection activity should be shown on the income statement.

2.

Expert Solution
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Explanation of Solution

Income statement: This is a financial statement that shows the net income earned or net loss suffered by a Company through reporting all the revenues earned and expenses incurred by the company over a specific period of time. An income statement is also known as an operations statement, an earnings statement, a revenue statement, or a profit and loss statement. The net income is the excess of revenue over expenses.

Show the accounts related to the preceding sale and collection activity should be shown on the income statement.

Company S
Income Statement
As of December 31, 2014
ParticularsAmount  ($)

Sales Revenue

[$235,000+$11,500+$26,500+$24,000+$19,000]

316,000
Less: Sales Returns and Allowances ($3,500+$500)4,000
Less: Sales Discount ($220+$2,000+$530$70)2,680
Net Sales Revenue309,320
Operating Expenses: 
Bad Debt Expense1,155

Table (2)

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Chapter 6 Solutions

Financial Accounting, 8th Edition

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. 1MECh. 6 - Prob. 2MECh. 6 - Prob. 3MECh. 6 - Recording Bad Debts Prepare journal entries for...Ch. 6 - Prob. 5MECh. 6 - Determining the Effects of Credit Policy Changes...Ch. 6 - Prob. 7MECh. 6 - Prob. 8MECh. 6 - Prob. 1ECh. 6 - Reporting Net Sales with Credit Sales, Sales...Ch. 6 - Prob. 3ECh. 6 - Determining the Effects of Credit Sales, Sales...Ch. 6 - Prob. 5ECh. 6 - Prob. 6ECh. 6 - Prob. 7ECh. 6 - Prob. 8ECh. 6 - Prob. 9ECh. 6 - Prob. 10ECh. 6 - Prob. 11ECh. 6 - Prob. 12ECh. 6 - Prob. 13ECh. 6 - Inferring Bad Debt Write-Offs and Cash Collections...Ch. 6 - Inferring Bad Debt Write-Offs and Cash Collections...Ch. 6 - Prob. 16ECh. 6 - Prob. 17ECh. 6 - Prob. 18ECh. 6 - Prob. 19ECh. 6 - Prob. 20ECh. 6 - Interpreting tho Effects of Salos Declines and...Ch. 6 - Prob. 22ECh. 6 - Prob. 23ECh. 6 - Prob. 24ECh. 6 - Prob. 1PCh. 6 - Prob. 2PCh. 6 - Recording Bad Debts and Interpreting Disclosure of...Ch. 6 - Determining Bad Debt Expense Based on Aging...Ch. 6 - Prob. 5PCh. 6 - Prob. 6PCh. 6 - Prob. 7PCh. 6 - Prob. 8PCh. 6 - Prob. 1APCh. 6 - Prob. 2APCh. 6 - Determining Bad Debt Expense Based on Aging...Ch. 6 - Prob. 4APCh. 6 - Prob. 5APCh. 6 - Prob. 1CPCh. 6 - Prob. 2CPCh. 6 - Prob. 3CPCh. 6 - Prob. 4CPCh. 6 - Prob. 5CPCh. 6 - Prob. 6CPCh. 6 - Prob. 1CC
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