Question

P6-1 Reporting Net Sales and Expenses with Discounts, Returns, and Bad Debts LO6-1, 6-2 [The following information applies to the questions displayed below.] The following data were selected from the records of Sykes Company for the year ended December 31, Current Year. Balances January 1, Current Year Accounts receivable (various customers) $ 120,000 Allowance for doubtful accounts 9,000 In the following order, except for cash sales, the company sold merchandise and made collections on credit terms 4/10, n/30 (assume a unit sales price of $500 in all transactions and use the gross method to record sales revenue). Transactions during Current Year Sold merchandise for cash, $270,000. Sold merchandise to R. Smith; invoice price, $12,000. Sold merchandise to K. Miller; invoice price, $33,000. Two days after purchase date, R. Smith returned one of the units purchased in (b) and received account credit. Sold merchandise to B. Sears; invoice price, $26,000. R. Smith paid his account in full within the discount period. Collected $100,000 cash from customer sales on credit in prior year, all within the discount periods. Miller paid the invoice in (c) within the discount period. Sold merchandise to R. Roy; invoice price, $20,500. Three days after paying the account in full, K. Miller returned seven defective units and received a cash refund. After the discount period, collected $6,000 cash on an account receivable on sales in a prior year. Wrote off a prior year account of $4,000 after deciding that the amount would never be collected. The estimated bad debt rate used by the company was 1.0 percent of credit sales net of returns.

Answer 1

No,	General Journal	Debit	Credit
a	Cash	270000
	sales revenue		270000
b	Accounts receivable-R.smith	12000
	sales revenue		12000
c	Accounts receivable-K.miller	33000
	sales revenue		33000
d	Sales returns and allowances	500
	Accounts receivable-R.smith		500
e	Accounts receivable-B.Sears	26000
	sales revenue		26000
f	Cash	11040
	Sales Discount	460
	Accounts receivable-R.smith		11500
g	Cash	100000
	Sales Discount	4167
	Accounts receivable		104167	(100000/96%)
h	Cash	31680
	Sales Discount	1320
	Accounts receivable-Kmiller		33000
i	Accounts receivable-R.roy	20500
	sales revenue		20500
j	Sales return and allowances	3500
	cash		3360
	sales discounts		140
k	Cash	6000
	accounts receivable		6000
l	Allowance for doubtful accounts	4000
	Accounts Receivable		4000
m	Bad debt expense	875
	Allowance for doubtful accounts		875
	so we have
	credit sales		91500
	Sales returns		4000
	net sales revenue		87500
	Bad debt rate		1%
	bad debt expense		875

Income statement
Sales revenue	361500
Less:sales return and allowance	-4000
Less:sales discounts	-5807
Net sales revenue		351693
Operating expense
Bad debt expense		875