Question

Compute Net Sales for problems 1-3

1. Sold merchandise to Sam, who charged the $3,000 purchase on his Visa. Visa charges a 2% credit card fee

2. On July 15, sold merchandise to Marie at an invoice price of $9,000; terms 3/10, n/30. On July 23, company collected payment from Marie

3. On July 20, sold merchandise to Emily at an invoice price of $4,000; terms 3/10, n/30. On July 21, Emily returned a portion of the merchandise because it was defective, valued at $500. On August 20, company collected payment from Emily

Record bad debt expense and write off & Prepare journal entry for problems 4-6

4. On November 13 of the current year, an account receivable for $98,000 was determined uncollectable and written off

5. At year end, the appropriate bad debt expense adjustment of $20,000 was recorded.

6. On 12/1, $200 payment was received for an account previously written off. (hint 4 journal entries)

Answer 1

Solution 1:

Net Sales = Gross sales - Visa Fee = $3,000 - ($3,000 * 2%) = $2,940

Solution 2:

Net Sales = Gross Sales - Sales discount = $9,000 - ($9,000*3%) = $8,730

Solution 3:

Net Sales = Gross sales - Sales return - Sales discount = $4,000 - $500 = $3,500

Discount is not applicable as payment is not received in 10 days of sale

Solution 4-6:

Journal Entries
Event	Date	Particulars	Debit	Credit
4	13-Nov	Allowance for doubtful accounts Dr	$98,000.00
		To Accounts receivables		$98,000.00
5	31-Dec	Bad debts expense Dr	$20,000.00
		To Allowance for doubtful accounts		$20,000.00
		(To record bad debts expense)
6a	12-Jan	Accounts receivable Dr	$200.00
		To Allowance for doubtful accounts		$200.00
		(To reinstate accounts receivables)
6b	12-Jan	Cash Dr	$200.00
		To Accounts receivables		$200.00
		(To record collection from customer previously written off)