The following data were selected from the records of Sykes Company for the year ended December 31, 2014.
|Balances January 1, 2014,|
|Accounts receivable (various customers||$116,000|
|Allowance for doubtful accounts||$9,000|
In the following order, except for cash sales, the company sold merchandise and made collections on credit terms 3/10, n/30 (assume a unit sales price of $600 in all transactions and use the gross method to record sales revenue).
Transactions during 2014.
A- Sold merchandise for cash, $262,000
B-Sold merchandise to R. Smith; invoice price, $8,500.
C- Sold merchandise to K. Miller, invoice price, $24,000.
D- Two days after the purchase date, R. Smith returned one of the units purchased in (b) and received an account credit.
E.. Sold merchandise to B. Sears; invoice price, $27,000.
F-R. Smith paid his account in full within the discount period.
G-Collected $97,000 cash from customer sales on credit in the prior year, all within the discount periods.
H- K. Miller paid the invoice in (c) within the discount period.
I-Sold merchandise to R. Roy; invoice price, $24,500.
J-Three days after paying the account in full, K. Miller returned seven defective units and received a cash refund.
k. After the discount period, collected $5,000 cash on an account receivable on sales in a prior year.
I- Wrote off a 2013 account of $4,000 after deciding that the amount would never be collected.
M- The estimated bad debt rate used by the company was 1.0 percent of credit sales net of returns.
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.
2. Show how the accounts related to the preparing sale and collection ascribed should be reported in 2014. Income statement (treat sale discount as a contra revenue).
There are four major financial statements that a company is preparing and these are Balance Sheet, Income Statement, Statement of Retained Earnings and Statement of Cash Flows. Income statement is a financial statement that reports the financial performance of the company during the period.
Answer and Explanation:
|B||Accounts Receivable||8,500||R. Smith|
|C||Accounts Receivable||24,000||K. Miller|
|D||Sales Returns||600||R. Smith|
|Accounts Receivable||600||R. Smith|
|E||Accounts Receivable||27,000||B. Sears|
|Sales Discount||237||R. Smith|
|Accounts Receivable||7,900||R. Smith|
|Sales Discount||3,000||previous year|
|Accounts Receivable||100,000||previous year|
|Sales Discount||720||K. Miller|
|Accounts Receivable||24,000||K. Miller|
|I||Accounts Receivable||24,500||R. Roy|
|J||Accounts Receivable||4,074||K. Miller|
|Accounts Receivable||5,000||previous year|
|L||Allowance for Doubtful Accounts||4,000||Write-off|
|M||Doubtful Accounts Expense||834|
|Allowance for Doubtful Accounts||834|
|1% x $83,400|
|Less: Sales Returns||600|
|Net Credit Sales after returns||83,400|
|2||Effect on Income Statement|
|Less: Sales Returns||600|
|Doubtful Accounts Expense||- 834|
Learn more about this topic:
from Accounting 101: Financial AccountingChapter 8 / Lesson 5