The following data were selected from the records of Sykes Company for the year ended December...

Question:

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.

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.

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).

Income Statement:

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:

1 Accounts Debit Credit Remarks
A Cash 262,000 Cash Sales
Sales 262,000 Cash Sales
B Accounts Receivable 8,500 R. Smith
Sales 8,500 R. Smith
C Accounts Receivable 24,000 K. Miller
Sales 24,000 K. Miller
D Sales Returns 600 R. Smith
Accounts Receivable 600 R. Smith
E Accounts Receivable 27,000 B. Sears
Sales 27,000 B. Sears
F Cash 7,663 R. Smith
Sales Discount 237 R. Smith
Accounts Receivable 7,900 R. Smith
G Cash 97,000 previous year
Sales Discount 3,000 previous year
Accounts Receivable 100,000 previous year
H Cash 23,280 K. Miller
Sales Discount 720 K. Miller
Accounts Receivable 24,000 K. Miller
I Accounts Receivable 24,500 R. Roy
Sales 24,500 R. Roy
J Accounts Receivable 4,074 K. Miller
Cash 4,074 K. Miller
K Cash 5,000 previous year
Accounts Receivable 5,000 previous year
L Allowance for Doubtful Accounts 4,000 Write-off
Accounts Receivable 4,000 Write-off
M Doubtful Accounts Expense 834
Allowance for Doubtful Accounts 834
1% x $83,400
Credit Sales 84,000
Less: Sales Returns 600
Net Credit Sales after returns 83,400
2 Effect on Income Statement
Sales 346,000
Less: Sales Returns 600
Sales Discount 3,957 4,557
Net Sales 341,443
Doubtful Accounts Expense - 834


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Operations of an Income Statement

from Accounting 101: Financial Accounting

Chapter 8 / Lesson 5
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