Answered: Shatner Importers, Inc. sells coffee…

Financial Accounting

15th Edition

ISBN:9781337272124

Author:Carl Warren, James M. Reeve, Jonathan Duchac

Publisher:Carl Warren, James M. Reeve, Jonathan Duchac

Chapter5: Accounting Systems

Section: Chapter Questions

Problem 14E: Guardian Services Inc. had the following transactions during the month of April: a. Record the June...

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Shatner Importers, Inc. sells coffee pots for $120 each. On November 12, the company sold to a customer on account with terms of /15, n/30. The customer paid for 20 of the coffee pots on November 27 and paid for the remaining on 11th.

Provide the necessary journal entries for Shatner to record these transactions under both the most-likely-amount and expected-value methods. For the most-likely-amount method, assume both that the customer will take the discount and won't take the discount. For the expected-value approach, assume that the customer is70% likely to take the discount and ignore any constraints on variable consideration. (Ignore the journal entry that would typically be necessary to record the reduction of inventory and cost of goods sold.) Round to two decimal places.
b. Provide a comparison of the impact on the income statement for each method.

begin by recording the transactions under the most-likely-amount method, assuming that the customer will take the discount. (Record debits first, then credits. Exclude explanations from any journal entries.)

Nov. 12: The company sold 60 coffee pots to a customer on account with terms of 3/15, n/30.

Account	November 12

Part 2

Nov. 27: The customer paid for 20 of the coffee pots.

Account	November 27

Part 3

Dec. 11: The customer paid for the remaining 40 coffee pots.

Account	December 11

part 4

Now record the transactions under the most-likely-amount method, assuming that the customer won't take the discount. (Record debits first, then credits. Exclude explanations from any journal entries.)

Nov. 12: The company sold 60 coffee pots to a customer on account with terms of 3/15, n/30.

Account	November 12

Part 5

Nov. 27: The customer paid for 20 of the coffee pots.

Account	November 27

Part 6

Dec. 11: The customer paid for the remaining 40 coffee pots.

Account	December 11

Part 7

Finally, record the transactions under the expected-value method. (Record debits first, then credits. Exclude explanations from any journal entries. Round intermediary calculations and your final answers to the nearest cent.)

Nov. 12: The company sold 60 coffee pots to a customer on account with terms of 3/15, n/30.

Account	November 12

Part 8

Nov. 27: The customer paid for 20 of the coffee pots.

Account	November 27

Part 9

Dec. 11: The customer paid for the remaining

40 coffee pots.

Account	December 11

Requirement b. Provide a comparison of the impact on the income statement for each method.

First, prepare a partial income statement under the most-likely-amount method (Net).

Review the journal entries prepared under this method.

Most-Likely-Amount Method (Net)

Other Revenue:

Total Revenue

Part 11

Next, prepare a partial income statement under the most-likely-amount method (Gross).

Review the journal entries prepared under this method.

Most-Likely-Amount Method (Gross)

Less:
Total Revenue

Part 12

Finally, prepare a partial income statement under the expected-value method.

Review the journal entries prepared under this method.

Expected-Value Method

Less:
Net sales
Other Revenue:

Total Revenue

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Shatner ​Importers, Inc. sells coffee pots for $120 each. On November ​12, the company sold to a customer on account with terms of ​/15, ​n/30. The customer paid for 20 of the coffee pots on November 27 and paid for the remaining on 11th.

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Shatner Importers, Inc. sells coffee pots for $120 each. On November 12, the company sold to a customer on account with terms of /15, n/30. The customer paid for 20 of the coffee pots on November 27 and paid for the remaining on 11th.