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The following data were selected from the records of Sykes Company for the year ended December...

The following data were selected from the records of Sykes Company for the year ended December 31, 2014.
  Balances January 1, 2014
    Accounts receivable (various customers) $ 120,000
    Allowance for doubtful accounts 8,000

In the following order, except for cash sales, the company sold merchandise and made collections on credit terms 2/10, n/30 (assume a unit sales price of $500 in all transactions and use the gross method to record sales revenue).
Transactions during 2014
a. Sold merchandise for cash, $235,000.
b. Sold merchandise to R. Smith; invoice price, $11,500.
c. Sold merchandise to K. Miller; invoice price, $26,500.
d.

Two days after purchase date, R. Smith returned one of the units purchased in (b) and received account credit.
e. Sold merchandise to B. Sears; invoice price, $24,000.
f. R. Smith paid his account in full within the discount period.
g. Collected $98,000 cash from customer sales on credit in prior year, all within the discount periods.
h. K. Miller paid the invoice in (c) within the discount period.
i. Sold merchandise to R. Roy; invoice price, $19,000.
j.

Three days after paying the account in full, K. Miller returned seven defective units and received a cash refund.
k. After the discount period, collected $6,000 cash on an account receivable on sales in a prior year.
l. Wrote off a 2013 account of $3,000 after deciding that the amount would never be collected.
m. The estimated bad debt rate used by the company was 1.5 percent of credit sales net of returns.
1.

Prepare the journal entries for these transactions, including the write-off of the uncollectible account and the adjusting entry for estimated bad debts. Do not record cost of goods sold. Show computations for each entry.
2.

Show how the accounts related to the preceding sale and collection activities should be reported on the 2014 income statement.

Solutions

Expert Solution

No, General Journal Debit Credit
a Cash 235000
sales revenue 235000
b Accounts receivable-R.smith 11500
sales revenue 11500
c Accounts receivable-K.miller 26500
sales revenue 26500
d Sales returns and allowances 500
Accounts receivable-R.smith 500
e Accounts receivable-B.Sears 24000
sales revenue 24000
f Cash 10780
Sales Discount 220
Accounts receivable-R.smith 11000
g Cash 98000
Sales Discount 2000
Accounts receivable-R.smith 100000 (98000/98%)
h Cash 25970
Sales Discount 530
Accounts receivable-Kmiller 26500
i Accounts receivable-R.roy 19000
sales revenue 19000
j Sales return and allowances 3500
cash 3430
sales discounts 70
k Cash 6000
accounts receivable 6000
l Allowance for doubtful accounts 3000
   Accounts Receivable 3000
m Bad debt expense 770
   Allowance for doubtful accounts 770
so we have
credit sales 81000
Sales returns 4000
net sales revenue 77000
Bad debt rate 1%
bad debt expense 770

Ques 2

Income statement
Sales revenue 316000
Less:sales return and allowance -4000
Less:sales discounts -2680
Net sales revenue 309320
Operating expense
Bad debt expense 770

ekkarill92 answered 2 years ago
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