Question

Just as you finished preparing the January 2017 bank reconciliation for ESER, you want to go through Bob’s commercial accounts that he gives customers 30 days to pay their outstanding accounts. You need to prepare the journal entries to record the following transactions:

Date Description January 1 Charged $2,250 for repairs City of Regina, terms 2/10, n/30 January 6 Charged $280 for repairs to Doer family, terms n/30 January 7 Reduced the price of the repair to the Doer family to $190 as goodwill gesture for paint damage January 9 Received full payment from City of Regina January 16 Sold a refurbished snow blower for $740 cash January 18 Charged $500 for repairs to Pembina Textiles Inc., n/30 January 28 Received payment from Doer family January 30 Wrote off $625 receivable from Wascana Daycare due to its recent bankruptcy

Answer 1

The journal entries for the given transactions are shown as follows:-

Journal Entries (Amounts in $)

Date	Account Titles and Explanations	Debit	Credit
Jan 1	Accounts Receivable	2,250
	Service Revenue		2,250
	(To record the service revenue for repairs)
Jan 6	Accounts Receivable	280
	Service Revenue		280
	(To record the service revenue for repairs)
Jan 7	Rebates and Discounts (280-190)	90
	Accounts Receivable		90
	(To record the rebate allowed)
Jan 9	Cash (2,250-45)	2,205
	Rebates and Discounts (2,250*2%)	45
	Accounts Receivable		2,250
	(To record the cash received from City of Regina)
Jan 16	Cash	740
	Sales Revenue		740
	(To record the cash sales)
Jan 18	Accounts Receivable	500
	Service Revenue		500
	(To record the service revenue)
Jan 28	Cash	190
	Accounts Receivable		190
	(To record amount received from Doer family)
Jan 30	Bad debt expense	625
	Accounts Receivable		625
	(To record the account wrote off)

Working Notes:-

a) The discount terms allowed to City of Regina was 2% discount if payment is made within 10 days and the payment is received from city of Regina within 10 days of sale. Hence 2% discount is allowed and debited to rebates and discounts account.

b) Account written of on Jan 30 is directly debited to bad debt expense and credited to accounts receivable (Direct Write off Method).