Reporting Net Sales and Expenses with Discounts, Returns, and Bad Debts (AP6-1)The followi...

Reporting Net Sales and Expenses with Discounts, Returns, and Bad Debts (AP6-1)

The following data were selected from the records of Sykes Company for the year ended December 31, 2011.

In the following order, except for cash sales, the company sold merchandise and made collections on credit term s 2/10 , n/30 (assume a unit sales price of S500 in all transactions and use the gross method to record sales revenue).

Transactions during 2011

a. Sold merchandise for cash, $234,000.

b. Sold merchandise to R. Smith: invoice price, $11, 500.

c. Sold merchandise to K. Miller: invoice price, $25000.

d. Two days after purchase date. R. Smith returned one of the units purchase d in (b) and received account credit.

e. Sold merchandise to B. Scars: invoice pr ice, $26,000.

f. R. Smith paid his account in full within the discount period .

g. Collected $98,000 cash from customer sales on credit in prior year, all within the discount periods.

h. K. Miller paid the invoice in (c) within the discount period.

i. Sold merchandise to R. Roy: invoice price, $17.500.

j. Three days after paying the account in full. K. Miller returned seven defective unit s and received a cash refund.

k. After the discount period, collected 56,nOn cash on an account receivable on sales in a prior year,

l. Wrote off a 20 10 account of 53,000 after deciding that the amount would never be collected.

m. The estimated bad debt rate used by the company was 1.5 percent of credit sales net of return

Required:

I. Using the following categories, indicate the effect of each listed transaction, including the write-o ff of the uncollectible account and the adjusting entry for estimated bad debt s (ignore cost of good s sold). Indicate the sign and amount of the effect or “N E” for “no effect.” The first transaction is used as an example.

(a)

2. Show how the accounts related to the preceding sale and collection activities should be reported on the 2011 income statement. (Treat sales discounts as a contra-revenue.)