Problem

Accounting for credit card sales and uncollectible accounts: percent of receivables allowa...

Accounting for credit card sales and uncollectible accounts: percent of receivables allowance method

Bishop Supply Company had the following transactions in 2012:

1.Acquired $60,000 cash from the issue of common stock.

2.Purchased $180,000 of merchandise for cash in 2012.

3.Sold merchandise that cost $110,000 for $200,000 during the year under the following terms:

$ 50,000	Cash sales
140,000	Credit card sales (The credit card company charges a 3 percent service fee.)
10,000	Sales on account

4.Collected all of the accounts receivable from the credit card company.

5.Collected $9,200 of accounts receivable.

6.Paid selling and administrative expenses of $46,000.

7.Determined that 5 percent of the ending accounts receivable balance would be uncollectible.

Required

a. Record the above events in a horizontal statements model like the following one. When you record amounts in the Cash Flow column, indicate whether the item is an operating activity (OA), an investing activity (IA), or a financing activity (FA). The letters NA indicate that an element is not affected by the event.