Question: The following trial balance was prepared for Tile Etc Inc

The following trial balance was prepared for Tile, Etc., Inc., on December 31, 2016, after the closing entries were posted:
Tile, Etc. had the following transactions in 2017:
1. Purchased merchandise on account for $580,000.
2. Sold merchandise that cost $420,000 for $890,000 on account.
3. Sold for $245,000 cash merchandise that had cost $160,000.
4. Sold merchandise for $190,000 to credit card customers. The merchandise had cost $96,000.
The credit card company charges a 4 percent fee.
5. Collected $620,000 cash from accounts receivable.
6. Paid $610,000 cash on accounts payable.
7. Paid $145,000 cash for selling and administrative expenses.
8. Collected cash for the full amount due from the credit card company.
9. Loaned $60,000 to J. Parks. The note had an 8 percent interest rate and a one-year term to maturity.
10. Wrote off $7,500 of accounts as uncollectible.
11. Made the following adjusting entries:
(a) Recorded uncollectible accounts expense estimated at 1 percent of sales on account.
(b) Recorded seven months of accrued interest on the note at December 31, 2017.
a. Prepare general journal entries for these transactions; post the entries to T-accounts; and prepare an income statement, a statement of changes in stockholders’ equity, a balance sheet, and a statement of cash flows for 2017.
b. Compute the net realizable value of accounts receivable at December 31, 2017.
c. If Tile, Etc. used the direct write-off method, what amount of uncollectible accounts expense would it report on the income statement?

View Solution:

Sale on SolutionInn
  • CreatedApril 20, 2015
  • Files Included
Post your question