Question: In early 2018 Pugwash Ltd Pugwash delivered a large order

In early 2018, Pugwash Ltd. (Pugwash) delivered a large order of goods to Ripon Inc. (Ripon), a new customer. In compliance with company policy, Pugwash did a credit check on Ripon and decided to provide it with a credit limit of $7,000. Ripon's order was for $9,500 so $2,500 was paid when the goods were delivered. Due to financial problems, Ripon wasn't able to pay the amount owing and in September Pugwash wrote off the amount owing. In December, Pugwash received a cheque from Ripon for the amount owing along with a letter of apology for the delay in paying the invoice.

a. Prepare the journal entry to record the sale to Ripon.
b. Prepare the journal entry to record the writeoff of the receivable from Ripon.
Assume Pugwash estimates its bad debt expense using the percentage of credit sales method.
c. Prepare the journal entry that would be recorded when Pugwash received the cheque from Ripon in December.

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  • CreatedFebruary 26, 2015
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