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Delta Automotive Corporation has the following assets listed in its 12/31/2021 trial balance: Cash in bank—checking...

Delta Automotive Corporation has the following assets listed in its 12/31/2021 trial balance:

Cash in bank—checking account $ 38,500
U.S. Treasury bills (mature in 60 days)* 6,000
Cash on hand (currency and coins) 2,950
U.S. Treasury bills (mature in six months)* 26,000
Undeposited customer checks 3,440

*Purchased on 11/30/21

Required:
1. Determine the correct balance of cash and cash equivalents to be reported in the current asset section of the 2021 balance sheet.

2. Tracy Company, a manufacturer of air conditioners, sold 200 units to Thomas Company on November 17, 2021. The units have a list price of $650 each, but Thomas was given a 30% trade discount. The terms of the sale were 3/10, n/30.

3-a. Prepare the journal entries to record the sale on November 17 (ignore cost of goods) and collection on November 26, 2021, assuming that the net method of accounting for cash discounts is used.
3-b. Prepare the journal entries to record the sale on November 17 (ignore cost of goods) and collection on December 15, 2021, assuming that the net method of accounting for cash discounts is used.

Solutions

Expert Solution

1. Cash and cash equivalents includes:

Cash in bank—checking account

$38,500

U.S. treasury bills

$6,000

Cash on hand

$2,950

Undeposited customer checks

$3,440

Total

$50,890

Journal

17-Nov

Accounts receivable - Thomas Company

91,000

Sales

91,000

26-Nov

Cash

88,270

Sales discount

2,730

Accounts receivable - Thomas Company

91,000

List price = $650 per unit

Trade discount = 30%

= 650 x 30%

= $195

Selling price per unit = List price - Trade discount

650 - 195

= $455

Total sales = Selling price per unit x Number of units sold

= 455 x 200

= $91,000

Sales discount = Sales x Discount rate

= 91,000 x 3/10

= $2,730

Cash received from Thomas Company = Total sales - Sales discount

= 91,000 - 2,730

= $88,270

Journal

17-Nov

Accounts receivable - Thomas Company

91,000

Sales

91,000

15-Dec

Cash

91,000

Accounts receivable - Thomas Company

91,000

ekkarill92 answered 2 years ago
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