1.
Prepare necessary
1.
Explanation of Solution
Account receivable:
The amount of money to be received by a company for the sale of goods and services to the customers is referred to as account receivable.
Date | Account Titles and explanation | Debit ($) | Credit ($) |
Accounts receivable | 70,000 | ||
Sales revenue | 70,000 | ||
(To record the sale made ) |
Table (1)
- Accounts receivable is an asset and there is an increase in the value of asset. Hence, debit the accounts receivable by $70,000.
- Sales revenue is component of
stockholder’s equity and there is an increase in the value of revenue. Hence, credit the sales revenue by $70,000.
Date | Account Titles and explanation | Debit ($) | Credit ($) |
Cash (1) | 45,080 | ||
Sales revenue | 920 | ||
Accounts receivable | 46,000 | ||
(To record the collection received on December 18, 2016) |
Table (2)
- Cash is an asset and there is an increase in the value of asset. Hence, debit the cash by $45,080.
- Sales revenue is component of stockholder’s equity and there is a decrease in the value of revenue. Hence, debit the sales revenue by $920.
- Accounts receivable is an asset and there is an increase in the value of asset. Hence, debit the accounts receivable by $46,000.
Date | Account Titles and explanation | Debit ($) | Credit ($) |
Cash | 18,000 | ||
Accounts receivable | 18,000 | ||
(To record the additional collection on the sales made) |
Table (3)
- Cash is an asset and there is an increase in the value of asset. Hence, debit the cash by $18,000.
- Accounts receivable is an asset and there is a decrease in the value of asset. Hence, credit the accounts receivable by $18,000.
Date | Account Titles and explanation | Debit ($) | Credit ($) |
Return liability | 1,500 | ||
Accounts receivable | 1,500 | ||
(To record the sales returns on credit merchandise) |
Table (4)
- Return liability is a liability and there is a decrease in the value of liability. Hence, debit the liability by $1,500.
- Accounts receivable is an asset and there is a decrease in the value of asset. Hence, credit the asset by $1,500.
Date | Account Titles and explanation | Debit ($) | Credit ($) |
No entry is required for the bank error | |||
Table (5)
Date | Account Titles and explanation | Debit ($) | Credit ($) |
No entry is required for the bank error | |||
Table (6)
Date | Account Titles and explanation | Debit ($) | Credit ($) |
Cash | 4,500 | ||
Accounts receivable(2) | 4,500 | ||
(To record the additional collection on the sales made) |
Table (7)
- Cash is an asset and there is an increase in the value of asset. Hence, debit the cash by $4,500.
- Accounts receivable is an asset and there is a decrease in the value of asset. Hence, credit the accounts receivable by $4,500.
Working note:
(1) Calculate the cash to be received on sales made.
(2) Calculate the amount of accounts receivable.
Note: In this case,
2.
Prepare necessary journal entries for the given transaction assuming that accounts receivable and sales are recorded at net price by the Company L.
2.
Explanation of Solution
Account receivable:
The amount of money to be received by a company for the sale of goods and services to the customers is referred to as account receivable.
Date | Account Titles and explanation | Debit ($) | Credit ($) |
Accounts receivable | 68,600 | ||
Sales revenue | 68,600 | ||
(To record the sale made ) |
Table (8)
- Accounts receivable is an asset and there is an increase in the value of asset. Hence, debit the accounts receivable by $68,600.
- Sales revenue is component of stockholder’s equity and there is an increase in the value of revenue. Hence, credit the sales revenue by $68,600.
Date | Account Titles and explanation | Debit ($) | Credit ($) |
Cash | 45,080 | ||
Accounts receivable | 45,080 | ||
(To record the additional collection on the sales made) |
Table (9)
- Cash is an asset and there is an increase in the value of asset. Hence, debit the cash by $45,080.
- Accounts receivable is an asset and there is a decrease in the value of asset. Hence, credit the accounts receivable by $45,080.
Date | Account Titles and explanation | Debit ($) | Credit ($) |
Cash | 18,000 | ||
Sales revenue | 360 | ||
Accounts receivable | 17,640 | ||
(To record the collection received on sale made) |
Table (10)
- Cash is an asset and there is an increase in the value of asset. Hence, debit the cash by $18,000.
- Sales revenue is component of stockholder’s equity and there is an increase in the value of revenue. Hence, debit the sales revenue by $17,640.
- Accounts receivable is an asset and there is an increase in the value of asset. Hence, debit the accounts receivable by $360.
Date | Account Titles and explanation | Debit ($) | Credit ($) |
Return liability | 1,470 | ||
Accounts receivable | 1,470 | ||
(To record the sales returns on credit merchandise) |
Table (11)
- Return liability is a liability and there is a decrease in the value of liability. Hence, debit the liability by $1,470
- Accounts receivable is an asset and there is a decrease in the value of asset. Hence, credit the asset by $1,470.
Date | Account Titles and explanation | Debit ($) | Credit ($) |
Accounts receivable | 90 | ||
Sales revenue | 90 | ||
(To record the sale made ) |
Table (12)
- Accounts receivable is an asset and there is an increase in the value of asset. Hence, debit the accounts receivable by $90.
- Sales revenue is component of stockholder’s equity and there is an increase in the value of revenue. Hence, credit the sales revenue by $90.
Date | Account Titles and explanation | Debit ($) | Credit ($) |
No entry is required | |||
Table (13)
Date | Account Titles and explanation | Debit ($) | Credit ($) |
Cash | 4,500 | ||
Accounts receivable(2) | 4,500 | ||
(To record the additional collection on the sales made) |
Table (14)
- Cash is an asset and there is an increase in the value of asset. Hence, debit the cash by $4,500.
- Accounts receivable is an asset and there is a decrease in the value of asset. Hence, credit the accounts receivable by $4,500.
3.
Compute the account receivable balance that will be reported on the balance sheet Company L’s as on December 31, 2016, when the accounts receivable and sales are recorded at
(a) Gross price
(b) Net price
3.
Explanation of Solution
(a) Compute the account receivable balance that will be reported on the balance sheet Company L’s as on December 31, 2016, when the accounts receivable and sales are recorded at gross price.
(b) Compute the account receivable balance that will be reported on the balance sheet Company L’s as on December 31, 2016, when the accounts receivable and sales are recorded at net price.
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Chapter 6 Solutions
EBK INTERMEDIATE ACCOUNTING: REPORTING
- Smith Company is required to charge customers an 8% sales tax on all goods it sells. At the time of sale, Smith includes the combined amount of both sales and sales tax in the sales account. At the end of May, Smiths sales account for May has a credit balance of 540,000. Prepare the sales tax adjusting journal entry for the end of May.arrow_forwardSheffield Co. uses the gross method to record sales made on credit. On June 1, 2020, it made sales of $55,000 with terms 4/15, n/45. On June 12, 2020, Sheffield received full payment for the June 1 sale.Prepare the required journal entries for Sheffield Co.arrow_forwardBlossom Company sells goods to Danone Inc. by accepting a note receivable on January 2, 2017. The goods have a sales price of $649,000 (cost of $460,000). The terms are net 30. If Danone pays within 5 days, however, it receives a cash discount of $9,000. Past history indicates that the cash discount will be taken. On January 28, 2017, Danone makes payment to Blossom for the full sales price. Prepare the journal entry(ies) to record the sale and related cost of goods sold for Blossom Company on January 2, 2017, and the payment on January 28, 2017. Assume that Blossom Company records the January 2, 2017, transaction using the net method. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No entry" for the account titles and enter 0 for the amounts.)arrow_forward
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- Swifty Industries purchased $10,600 of merchandise on February 1, 2025, subject to a trade discount of 10% and with credit terms of 3/15, n/60. It returned $2,600 (gross price before trade or cash discount) on February 4. The invoice was paid on February 13. (a) Assuming that Swifty uses the perpetual method for recording merchandise transactions, record the purchase, return, and payment using the gross method. (If no entry is required, select "No entry" for the account titles and enter O for the amounts. Round answers to 2 decimal places, e.g. 6,578.25. Credit account titles are automatically indented when amount is entered. Do not indent manually. List all debit entries before credit entries.) Date Feb. 1 Feb. 4 Feb. 13 < Account Titles and Explanation Debit Creditarrow_forwardWildhorse Company sells goods to Danone Inc. by accepting a note receivable on January 2, 2017. The goods have a sales price of $569,900 (cost of $500,000). The terms are net 30. If Danone pays within 5 days, however, it receives a cash discount of $9,900. Past history indicates that the cash discount will be taken. On January 28, 2017, Danone makes payment to Wildhorse for the full sales price.Prepare the journal entry(ies) to record the sale and related cost of goods sold for Wildhorse Company on January 2, 2017, and the payment on January 28, 2017. Assume that Wildhorse Company records the January 2, 2017, transaction using the net method.arrow_forwardZell Company had sales of $1,800,000 and related cost of merchandise sold of $1,150,000 for its first year of operations ending December 31, 2019. Zell Company provides customers a refund for any returned or damaged merchandise. At the end of the year, Zell Company estimates that customers will request refunds and allowances for 1.5% of sales and estimates that merchandise costing $16,000 will be returned. Assume that on February 3, 2020, Anderson Co. returned merchandise with a selling price of $5,000 for a cash refund. The returned merchandise originally cost Zell Company $3,100. (a) Journalize the adjusting entries on December 31, 2019, to record the expected customer refunds, allowances, andreturns. (b) Journalize the entries to record the returned merchandise and cash refund to Anderson Co.arrow_forward
- Bramble Industries purchased $9,300 of merchandise on February 1, 2025, subject to a trade discount of 10% and with credit terms of 3/15, n/60. It returned $2,300 (gross price before trade or cash discount) on February 4. The invoice was paid on February 13. (a) Assuming that Bramble uses the perpetual method for recording merchandise transactions, record the purchase, return, and payment using the gross method. (If no entry is required, select "No entry" for the account titles and enter O for the amounts. Round answers to 2 decimal places, e.g. 6,578.25. Credit account titles are automatically indented when amount is entered. Do not indent manually. List all debit entries before credit entries.) Date Account Titles and Explanation Search C SE DELL Debit Creditarrow_forwardEvergreen Company sells lawn and garden products to wholesalers. The company's fiscal year-end is December 31. During 2024, the following transactions related to receivables occurred: February 28 Sold merchandise to Lennox, Incorporated, for $24,000 and accepted a 8%, 7-month note. 8% is an appropriate rate for this type of note. March 31 Sold merchandise to Maddox Company that had a fair value of $16,560, and accepted a noninterest-bearing note for which $18,000 payment is due on March 31, 2025. April 3 Sold merchandise to Carr Company for $12,000 with terms 2/10, n/30. Evergreen uses the gross method to account for cash discounts. April 11 Collected the entire amount due from Carr Company April 17 A customer returned merchandise costing $4,100. Evergreen reduced the customer's receivable balance by $5,900, the sales price of the merchandise. Sales returns are recorded by the company as they occur. April 30 Transferred receivables of $59,000 to a factor without recourse. The factor…arrow_forwardEastman Corporation sells merchandise with a list price of $13,000 on February 1, 2019, with terms of 1/10, n/30. On February 10, 2019, payment was received on merchandise originally billed for $7,500, and the balance due was received on March 1, 2019. Required: 1. Prepare the journal entries to record the preceding information assuming that Eastman records accounts receivable and sales at (a) the gross price and (b) the net price. 2. Next Level What implied annual interest rate is Eastman’s customer incurring by failing to take the cash (sales) discount? (Assume a 365-day year.) 3. Next Level Which method—recording accounts receivable at the gross price or net price—is theoretically superior? Why?arrow_forward
- Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage Learning