The balance sheet of Libra, Inc., a world leader in the design and sale of telescopic equipment, reported the following
In 2016, Libra recorded $13,200 (gross) in sales (all on account), of which $1,200 (gross) was returned for credit. The cost of sales was $7,260; the cost of the merchandise returned was $660. Libra offers its customers credit terms of 2/10, n/30. Sixty percent of collections on accounts receivable were made within the discount period. Libra wrote off uncollectible accounts receivable in the amount of $200 (net) during 2016. Sales returns are estimated to be 5% of sales.
1. Compute the amount of uncollectible accounts expense recorded by Libra in 2016.
2. Compute Libra's cash collections from customers in 2016.
3. Open T-accounts for Accounts Receivable and Allowance for Uncollectible Accounts. Enter the beginning balances into each of these accounts. Prepare summary journal entries in the T-accounts to record the following for 2016:
a. Sales revenue
b. Cost of goods sold
c. Estimated refunds
d. Cost of estimated returns
e. Merchandise returned
f. Cost of merchandise returned
g. Collections including sales discounts forfeited
h. Write-offs of uncollectible accounts
i. Uncollectible-Accounts Expense
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...
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