Question

1. Sales Discounts (6 points) Your company provides sales discounts to customers that pay sooner, and they typically do. You make a sale of $1,000 on 9/1/2020 to your favorite customer and provide terms 2/10, n/30. a) Provide the journal entry to record this sale on 9/1/2020 under the net method. b) Assume the customer pays in full in 8 days. Provide the journal entry to record the cash receipt. c) Instead, assume the customer pays in full in 29 days. Provide the journal entry to record the cash receipt. 2. Allowance for Bad Debts (6 points) Your company records bad debt expense throughout the year based on credit sales, which it estimates to be 1% of credit sales. The company then makes an adjustment at year end using the balance sheet approach. Total sales were $3 million ($2 million were credit sales). a) Record the journal entry for bad debt expense using the income statement approach. b) At year end, the company anticipates that $30,000 of accounts receivable will be uncollectible. The beginning balance of allowance for bad debts (before your entry above) was $15,000 and the company did not write off any accounts receivable during the year. Record the appropriate adjusting entry. I 3. Factoring of Accounts Receivable (5 points) Valley Ice Cream transferred $120,000 of accounts receivable with recourse to Sensible Bank. Sensible remits 90% of the factored amount to Valley and retains 10% to cover sales returns and allowances. Once Sensible collects the receivables, it will also remit to Valley a portion of the retained amount that portion is estimated to be $10,000). Sensible charges a 2% fee (on the $120,000) paid at the beginning of the factoring arrangement, and Valley anticipates a $6,000 recourse obligation Prepare the journal entry to record the transfer assuming that the sale criteria are met.

Answer 1

Requirement 1(Question 1):-

Under the Net method , when a sale is made, it is assumed that a customer will avail the discounts and accordingly, the sales and accounts receivable are recorded at Net amounts.

Journal entry (a):-

09/01/2020	Accounts Receivable	980
	To Customer A/c		980
	(To record the accounts receivable under net method)

Journal entry (b):-

09/08/2020	Bank A/c	980
	To Accounts Receivable A/c		980
	(To record cash received on accounts receivable)

Journal entry (c):-

09/29/2020	Bank A/c	1,000
	To Accounts Receivable A/c		980
	To Cash discount forfeited A/c		20
	(To record cash received on accounts receivable and discount forfeited)

Kindly note that i have answered the first question and related subsections per the HOMEWORKLIB RULESs. Request you to post the remaining question separately so that we can answer them as well. All the best and please let me know if you have any questions via the comments section .