Wholesale Warehouse Stores sold $950,000 in merchandise during 2014. Of this amount, $400,000 was on credit with terms 2/10, n/30 (75 percent of these amounts were paid within the discount period), $500,000 was paid with credit cards (there was a 3 percent credit card discount), and the rest was paid in cash. On December 31, 2014, the Accounts Receivable balance was $80,000. The beginning balance in the Allowance for Doubtful Accounts was $9,000 and $6,000 of bad debts was written off during the year.

Required:

1. Compute net sales for 2014, assuming that sales and credit card discounts are treated as contra-revenues.

2. Assume that Wholesale uses the percentage of sales method for estimating bad debt expense and that it estimates that 2 percent of credit sales will produce bad debts. Record bad debt expense for 2014.

3. Assume instead that Wholesale uses the aging of accounts receivable method and that it estimates that $10,000 worth of current accounts is uncollectible. Record bad debt expense for 2014.

Answer rating: 100% (QA)

1 Credit Sales 400000 Credit card sales 500000 Discount on credit card sales 5... View the full answer