Problem 10-3A (30 minutes) Part A 1. a) Cash... 740,000... 2,220,000 Sales... 2,960,000 To record sales; 25% x $2,960,000 total sales = cash sales of $740,000. Cost of Goods Sold... 1,804,000 Merchandise Inventory... 1,804,000 To record cost of sales. b) Sales Returns and Allowances... 114,000... 57,000 Cash... 57,000 To record return of defective merchandise to be scrapped. c)... 24,000 Allowance For Doubtful Accounts... 24,000 To reverse write-off due to recovery. Cash... 24,000... 24,000 To record recovery. d) Allowance For Doubtful Accounts... 39,000... 39,000 To record write-off of uncollectible accounts. e) Cash... 1,880,000... 1,880,000 To record collections from credit customers.
Problem 10-3A (continued) Part B 2. Dec. 31 Bad Debt Expense... 21,630... 21,630 2,220,000 57,000 = 2,163,000 2,163,000 1% = 21,630. 3. Accounts receivable... $742,000 Less: Allowance for doubtful accounts... 23,310 $718,690 OR Accounts receivable (net of $23,310 estimated uncollectible accounts)... $718,690 Calculation of balance in AFDA : 39,000 AFDA 16,680 24,000 21,630 23,310 4. $21,630
Problem 10-3A (concluded) Part C 5. Dec. 31 Bad Debt Expense... 20,580... 20,580 742,000 3% = 22,260 1,680 = 20,580. Dec. 31/10 Dec. 31/11 498,000 16,680 Dec. 31/10 a) 2,220,000 57,000 b) c) 24,000 24,000 c) 24,000 c) 742,000 39,000 d) d) 39,000 1,880,000 e) 1,680 3% $22,260 22,260 Required adjusted balance Unadjusted balance, Dec. 31/11 What adjustment is needed? 6. Accounts receivable... $742,000 Less: Allowance for doubtful accounts... 22,260 $719,740 OR Accounts receivable (net of $22,260 estimated uncollectible accounts)... $719,740 7. $20,580
Problem 10-4A (35 minutes) 2011 a.... 2,289,000 Sales... 2,289,000 COGS... 1,240,000 Merchandise Inventory... 1,240,000 b.... 34,540... 34,540 c. Cash... 1,334,460... 1,334,460 d. Bad Debt Expense... 48,340... 48,340 0 Unadjusted 34,540 Credit Sales 2,289,000 34,540 Write-offs 1,334,460 Collections 48,340 Adjustment needed 920,000 13,800 Required 1.5% 13,800
Problem 10-4A (concluded) 2012 e.... 2,941,560 Sales... 2,941,560 COGS... 1,592,000 Merchandise Inventory... 1,592,000 f.... 53,760... 53,760 g. Cash... 2,207,800... 2,207,800 h. Bad Debt Expense... 63,960... 63,960 Bal. 920,000 13,800 Bal. Credit Sales 2,941,560 53,760 Write-offs Write-offs 53,760 2,207,800 Collections Adjustment 63,960 needed Bal. 1,600,000 24,000 1.5% 24,000 Required
Problem 10-3B (30 minutes) Part A 1. a) Cash... 258,750... 1,466,250 Sales... 1,725,000 To record sales; 15% x $1,725,000 total sales = cash sales of $258,750. Cost of Goods Sold... 1,207,500 Merchandise Inventory... 1,207,500 To record cost of sales. b) Sales Returns and Allowances... 49,000... 49,000 To record return of defective merchandise to be scrapped. c)... 29,000 Allowance For Doubtful Accounts... 29,000 To reverse write-off due to recovery. Cash... 29,000... 29,000 To record recovery. d) Allowance For Doubtful Accounts... 132,500... 132,500 To record write-off of uncollectible accounts. e) Cash... 1,474,500 Sales Discounts... 26,000... 1,500,500 To record collections from credit customers less discounts of $26,000. Part B 2. Dec. 31 Bad Debt Expense... 111,300... 111,300 1,466,250 49,000 26,000 = 1,391,250; 1,391,250 8% = 111,300.
Problem 10-3B (continued) 3. Accounts receivable... $274,250 Less: Allowance for doubtful accounts... 20,260 $253,990 OR Accounts receivable (net of $20,260 estimated uncollectible accounts)... $253,990 Calculation of balance in AFDA: 4. $111,300 132,500 AFDA 12,460 29,000 111,300 20,260 Part C 5. Dec. 31 Bad Debt Expense... 102,010... 102,010 To record estimated uncollectible accounts receivable. Dec. 31/10 Dec. 31/11 490,000 12,460 Dec. 31/10 a) 1,466,250 49,000 b) c) 29,000 29,000 c) 29,000 c) 132,500 d) d) 132,500 274,250 4% = $10,970 1,500,500 e) Unadjusted balance, Dec. 31/11 91,040 102,010 10,970 Required adjusted balance What adjustmen is needed?
Problem 10-3B (concluded) 6. Accounts receivable... $274,250 Less: Allowance for doubtful accounts... 10,970 $263,280 OR Accounts receivable (net of $10,970 estimated uncollectible accounts)... $263,280 7. $102,010 Problem 10-4B (35 minutes) 2011 a.... 1,346,980 Sales... 1,346,980 COGS... 972,000 Merchandise Inventory... 972,000 b. Cash... 874,500... 874,500 c.... 16,480... 16,480 d. Bad Debt Expense... 21,040... 21,040 Credit Sales 1,346,980 874,500 Collections 16,480 Write-offs Write-offs 16,480 21,040 Adjustment needed 456,000 4,560 1% 4,560 Required