During December 2013, Gateway Inc. had the following transactions: a) December 2, sold merchandise worth of...
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During December 2013, Gateway Inc. had the following transactions: a) December 2, sold merchandise worth of $15,000 to Tom, 80% of which were on account. b) December 4, Tom returned merchandise worth of $500-10% related to cash sales, and 90% related to sales on account. c) December 12, Tom paid off the purchase made on December 2. d) December 17, wrote off $1,000 accounts receivables deemed uncollectible. e) December 27, received cash payment of $600 for accounts receivable previously written off. Additional information - Credit sales term: 2/15, n/30. - Sales Revenue as at November 30, 2013: Cash Sales: $37,000; Net Credit Sales: $328,000 - The balance of Accounts Receivable As at December 31, 2012: $55,000; As at November 30, 2013: $51,000. - Estimated uncollectible rate applicable to all receivables, regardless of the age: As at December 31, 2012: 3.0%; As at December 31, 2013: 3.5%. Required 1: Prepare journal entries for transactions a) to f), above. Required 2: What is the amount of bad debt expense should Gateway record at the fiscal year-end, December 31, 2013? Show your calculations. Required 3: Assume, starting from 2013, Gateway follows the Percentage of Credit Sales method to determine bad debt expense. Based on past experience, Gateway estimates the bad debt rate to be 1% of net credit sales. Show, in proper form, how accounts receivable would be presented on the company's Statement of Financial Position as at December 31, 2013. During December 2013, Gateway Inc. had the following transactions: a) December 2, sold merchandise worth of $15,000 to Tom, 80% of which were on account. b) December 4, Tom returned merchandise worth of $500-10% related to cash sales, and 90% related to sales on account. c) December 12, Tom paid off the purchase made on December 2. d) December 17, wrote off $1,000 accounts receivables deemed uncollectible. e) December 27, received cash payment of $600 for accounts receivable previously written off. Additional information - Credit sales term: 2/15, n/30. - Sales Revenue as at November 30, 2013: Cash Sales: $37,000; Net Credit Sales: $328,000 - The balance of Accounts Receivable As at December 31, 2012: $55,000; As at November 30, 2013: $51,000. - Estimated uncollectible rate applicable to all receivables, regardless of the age: As at December 31, 2012: 3.0%; As at December 31, 2013: 3.5%. Required 1: Prepare journal entries for transactions a) to f), above. Required 2: What is the amount of bad debt expense should Gateway record at the fiscal year-end, December 31, 2013? Show your calculations. Required 3: Assume, starting from 2013, Gateway follows the Percentage of Credit Sales method to determine bad debt expense. Based on past experience, Gateway estimates the bad debt rate to be 1% of net credit sales. Show, in proper form, how accounts receivable would be presented on the company's Statement of Financial Position as at December 31, 2013.
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Date Dec 2 Dec 4 Dec 12 Account Title and Explanation Cash 15000 12000 Accounts r... View the full answer
Related Book For
Fundamental financial accounting concepts
ISBN: 978-0078025365
8th edition
Authors: Thomas P. Edmonds, Frances M. Mcnair, Philip R. Olds, Edward
Posted Date:
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