7-2 Homework Chapter 7.odp - Harwell Company manufactures...

Harwell Company manufactures automobile tires. On July 15, 2013, the company sold 1,400 tires to
the Nixon Car Company for $40 each. The terms of the sale were 3/10, n/30. Harwell uses the
gross method of accounting for cash discounts.

Colorado Rocky Cookie Company offers credit terms to its customers. At the end of 2013, accounts
receivable totaled $655,000. The allowance method is used to account for uncollectible accounts.
The allowance for uncollectible accounts had a credit balance of $38,000 at the beginning of 2013
and $24,000 in receivables were written off during the year as uncollectible. Also, $1,800 in cash
was received in December from a customer whose account previously had been written off. The
company estimates bad debts by applying a percentage of 15% to accounts receivable at the end o
the year.

On June 30, 2013, the Esquire Company sold some merchandise to a customer for $54,000. In
payment, Esquire agreed to accept a 7% note requiring the payment of interest and principal on
March 31, 2014. The 7% rate is appropriate in this situation.