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.
Want to see more full solutions like this?
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_forwardLisa Company began operations in 2018. For the year ended December 31, 2018, Lisa made available the following information: Total merchandise purchases for the year 7,000,000 Merchandise inventory at December 31 1,400,000 Collection from customers 4,000,000 All merchandise was marked to sell at 40% above cost. All sales are on a credit basis and all receivables are collectible. What is the balance of accounts receivable on December 31, 2018?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_forward
- Whispering industries purchased $8,100 of merchandise on february 1, 2025, subject to a trade discount of 10% and with credit terms of 3/15, n/60. it returned $2,100 ( gross price before trade or cash discount) on february 4. the invoice was paid on february 13arrow_forwardRestin Co. uses the gross method to record sales made on credit. On June 1, 2017, it made sales of $50,000 with terms 3/15, n/45. On June 12, 2017, Restin received full payment for the June 1 sale. Prepare the required journal entries for Restin Co.arrow_forwardOn June 1, 2023, AAA Company sold merchandise with an invoice price of 5,000,000 to a customer. The entity allowed trade discounts of 15%, and 10%. Credit terms were 3/10, n/30 and the sale was made FOB destination. AAA Company paid 100,000 of the delivery cost. a. Compute the total amount of purchases to be included on the buyer’s inventory in the determination of cost of goods available for sale if payment was made beyond the discount period. b. What is the full amount received by AAA company if payment was made on June 11, 2023?arrow_forward
- 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_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_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_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_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_forwardHalifax Manufacturing allows its customers to return merchandise for any reason up to 90 days after delivery and receive a credit to their accounts. All of Halifax's sales are for credit (no cash is collected at the time of sale). The company began 2018 with a refund liability of $390,000. During 2018, Halifax sold merchandise on account for $13,300,000. Halifax's merchandise costs it 65% of merchandise selling price. Also during the year, customers returned $386,000 in sales for credit, with $213,000 of those being returns of merchandise sold prior to 2018, and the rest being merchandise sold during 2018. Sales returns, estimated to be 3% of sales, are recorded as an adjusting entry at the end of the year. Record the year-end adjusting entry for estimated returns. Please don't provide answer in image format thank youarrow_forward
- Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage Learning