Question

1- Bates Co. has a $300,000 balance in Accounts Receivable and a $4,000 debit balance in Allowance for Doubtful Accounts. Credit sales for the period totaled $1,800,000. What is the amount of the bad debt adjusting entry if Bates uses a percentage of credit sales basis (at 2%) or a percentage of receivables basis (at 10%)? 2. The following information is available for Moon Co. - Sales = $130,000; Ending Inventory = $12,000; Purchases = $90,000: Freight-In = $10.000; Purchases Returns & Allowances = $5,000; and Beginning Inventory = $15,000. Moon's Cost of Goods Sold is? 3- credit sale of $800 is made on April 25, terms 2/10, n/30 on which a return of $50 is granted on April 28. What amount is received as payment in full on May 1? 4- A new truck costing $40,000 was purchased using the company's cash. The truck is actually worth $55,000. What is the entry to record the purchase of the new truck? 5. A company purchased delivery equipment on April 1, 20Y1 for $68,000. It is estimated that the equipment will have an $12,000 salvage value at the end of its 7- year useful life. Using the straight line method of depreciation, the amount to be recorded as depreciation expense at December 31, 20Y1 is 6- Saxon Co. accepted $75,000 of Visa credit card charges for merchandise sold on July 1. Visa charges 2% for its credit card use. The entry to record this transaction by Saxon Co. will include a credit to Sales Revenue of $75,000 and a debit(s) to?

Answer 1

1.

If Bates uses a percentage of credit sales basis, the amount of bad debt adjusting entry would be $36,000 ($1,800,000 x 2%).

If Bates uses a percentage of receivables basis, the amount of bad debt adjusting entry would be $34,000 [($300,000 x 10%) + $4,000].

2.

Moon's cost of goods sold

= Beginning inventory + Purchases + Freight-in - Purchase returns and allowances - Ending inventory

= $15,000 + $90,000 + $10,000 - $5,000 + $12,000

= $98,000

3.

Amount received as payment in full on May 1

= Selling price - Returns - Discount allowed

= $800 - $50 - [($800 - $50) x 2%]

= $735

4.

The following journal entry will be made to record the purchase of the new truck:

Account Titles and Explanation	Debit	Credit
Equipment (or Truck)	$40,000
Cash		$40,000

5.

Amount to be recorded as Depreciation Expense

= (Cost - Salvage value) x 1/Useful life x 9/12

= ($68,000 - $12,000) x 1/7 x 9/12

= $6,000

6.

The entry to record the transaction will include a debit to Cash and a debit to Credit Card Expense.