Question

Olivia’s Shoes sells high end footwear. Due to the high cost of each pair of footwear, Olivia’s Shoes allow customers to charge their purchases to an in-store account. COGS is 60% of the selling price. The below transactions occurred during the months of December 2019 and January 2020. Olivia’s Shoes has a December 31 year end. All customer terms are net 30 days. On December 1, 2019 Olivia’s Shoes had an Accounts Receivable debit balance of $490,000 and an Allowance for Doubtful Accounts credit balance of $5,200. The following transactions occurred during 2019 and 2020: 

2019 

Dec 1 Accepted Mrs. Cameron’s $5,000, 2-month, 6% note in settlement of a past due balance on account. Interest is due at maturity. 

Dec 7 Received $400 payment from Mrs. Stanley for purchases made on account in November. 

Dec. 10 Wrote off a $2,700 account receivable from Mrs. Stone as uncollectible. 

Dec 15 Customer purchased a pair of boots for $1000 with cash. 

Dec 20 Mr. Hamilton purchased 1 pair of sneakers for $700. He paid $300 in cash and the rest was charged to his in-store account. 

Dec. 31 Prepared an aging of the accounts receivable and estimated its uncollectible accounts to be $8,200. Recorded the year-end adjustment for bad debts. 

Dec. 31 Recorded the adjusting entry to accrue the interest earned on Mrs. Cameron’s note. 

2020 

Jan 10 Received $400 from Mr. Hamilton 

Jan. 20 Received payment of $2,700 from Mrs. Stone on account which had been written off as uncollectible on Dec. 10th. 

Jan. 31 Collected cash from Mrs. Cameron in full payment of the Dec.1 note with interest. 

Instructions: Prepare all required journal entries for the above transactions assuming Olivia’s Shoes uses the allowance method. Any required allowances are recorded at the end of each month. Round all answers to the nearest whole dollar.