Question

Question 3 (30%) White Company allows customers to make purchases on credit. The terms of all credit sales are 2/10, n/30, and all sales are recorded at the gross price. Other customers can use a bank credit card where the bank deducts a 4% service charge for credit card sales and credits the bank account of White immediately when credit card receipts are deposited. White uses the perpetual inventory method. Prepare journal entries to record the following selected transactions and events. June 4Sold $12,000 of merchandise (cost $7,000) on credit to Grant. Sold $17,000 of merchandise (cost $9,350) to customers who used a bank credit card, receipts were processed and deposited the same day. Sold $8,500 of merchandise (cost $4,500) on credit to Emma Company. Accepted a $6,700, 45-day, 6% note dated this day in granting Cory Tam a time extension on his past-due account receivable. 10 12 15 Received Grant's check in full payment of the purchase on June 4. Wrote off the account of Z. Westmore. The $1,580 balance was from a credit sale in January Accepted a $6,240, 30-day, 10% note dates this day in granting F. Potter a time extension on his past-due account receivable. 20 July 17 Received the amount previously written-off from Z. Westmore. 20 F. Potter dishonored his note when presented for payment. 25 Received payment of principal plus interest from Cory Tam.

Answer 1

Journal Entries in the books of White Company

Date	Particulars	Debit ($)	Credit ($)
June 04	Accounts Receivable	12,000
	Sales Revenue		12,000
	(Credit sales to Grant)
June 04	Cost of goods sold	7,000
	Finished goods inventory		7,000
	(Depletion of inventory)
June 06	Accounts receivable	17,000
	Sales revenue		17,000
	(Credit card sales to customers)
June 06	Cash	16,320
	Credit card expense	680
	Accounts receivable		17,000
	(Cash collected after deducting service charges)
June 06	Cost of goods sold	9,350
	Finished goods inventory		9,350
	(Depletion of inventory)
June 08	Accounts Receivable	8,500
	Sales revenue		8,500
	(Credit sales to Emma Company)
June 08	Cost of goods sold	4,500
	Finished goods inventory		4,500
	(Depletion of inventory)
June 10	Note receivable	6,700
	Accounts receivable		6,700
	(45 days 6% Note accepted against accounts receivable from Cory Tam)
June 12	Cash	11,760
	Cash discount	240
	Accounts receivable		12,000
	(Cash received from Grant less discount)
June 15	Allowance for doubtful account	1,580
	Accounts receivable		1,580
	(Accounts receivable from Z.Westmore written off)
June 20	Note receivable	6,240
	Accounts receivable		6,240
	(30 days 10% Note accepted against accounts receivable from F. Potter)
July 17	Accounts receivable	1,580
	Allowance for doubtful account		1,580
	(Account of Z. Westmore recovered)
July 17	Cash	1,580
	Accounts receivable		1,580
	(Account of Z. Westmore recovered)
July 20	Accounts receivable	6,291.29
	Notes receivable		6,240
	Interest income		51.29
	(Note dishonoured by F. Potter)
July 25	Cash	6,749.56
	Interest income		49.56
	Notes receivable		6,700
	(Full payment received from Cory Tom)