Corp. is a company that sells bedroom products. The information for the month of November is as follows:
Nov 1 Corp sold merchandise to Ltd. for a sales price of $20,000 [3/10, net/60]. The company used the net method to recognize sales and returns and recognized sales discount forfeited on the 1st day past the discount period.
Nov 2 Izzie Inc. a client previously written off has paid back Corp the $13,000 that it owed in the month of October. Corp used the allowance method to account for bad debt expenses.
Nov 3 A portion of goods purchased by Ltd. on Nov 1 turned out to be defective. Ltd. returned the merchandise with a sales price of $2,500.
Nov 8 Corp factored $6,000 of accounts receivable with recourse at a financing charge of 5%. These accounts receivable were subject to 2% discount and were all past the discount period. (The company has already recorded sales discount forfeited). Assume a recourse liability of $200.
Nov 9 Corp factored another $5,000 of accounts receivable without recourse at a financing charge of 7%. These accounts receivable were subject to 1% discount and were all past the discount period. (The company forgot to record sales discount forfeited).
Nov 15 Corp pledged specific accounts receivable of $1,000 to Bank as security of a loan of $15,000 at finance charge of 5% upfront of the loan amount plus interest of 5% on the outstanding balance when the loan is repaid. Corp will continue to make the collections. All accounts receivable were past due and sales discount forfeited have been recorded already.
Nov 30 Ltd notified Corp that it is bankrupt and will pay only 20% of its account. Hence, Corp needed to write off Ltd’s account. Corp used the allowance method to account for bad debt expenses.
Record each transaction in general journal entry form
Nov1
Ltd. A/c Dr 19400
Discount A/c Dr 600
To sales A/c 20000
Nov2
To allowance for doubtful accounts A/c 13000
To Izzie Inc. 13000
Nov3
Sales Return A/c Dr 2500
To Ltd. A/c 2425
To Discount A/c 75
Nov8
Factoring Expense A/c Dr 300
To Account receivables A/c 5800
To recourse liabilty A/c 200
Nov9
To Discount A/c 50
Factoring Expense A/c Dr 350
To Account receivables A/c 5000
Nov11
Ltd. A/c Dr 525
To Discount A/c 525
Nov15
Bank A/c Dr 14250
Loan Charges A/c Dr 750
To Loan A/c 15000
Nov30
Cash A/c Dr 3500
Allowance for doubtful accounts a/c Dr 14000
To Ltd. A/c 17500
Corp. is a company that sells bedroom products. The information for the month of November is...
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