Accounting Exam II.docx - Accounting Exam 2 Chapter 7 Question#1 Harwell Company manufactures automobile tires On the company sold 2,000 tires to the

Accounting Exam II.docx - Accounting Exam 2 Chapter 7...

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Accounting Exam 2 Chapter 7 Question #1 Harwell Company manufactures automobile tires. On July 15, 2018, the company sold 2,000 tires to the Nixon Car Company for \$50 each. The terms of the sale were 2/15, n/30. Harwell uses the gross method of accounting for cash discounts. 1. Prepare the journal entries to record the sale on July 15 (ignore cost of goods) and collection on July 23, 2018 July 15 th Accounts Receivable 100,000 Sales Revenue 100,000 \$2,000 x \$50 =100,00 July 23 rd Cash 98,000 Sales Discount 2,000 Accounts Receivable 100,000 100,000 x .02= 2,000 100,000 – 2,000 = 98,000 2. Prepare the journal entries to record the sale on July 15 (ignore cost of goods) and collection on August 15, 2018 July 15 th Accounts Receivable 100,000 Sales Revenue 100,000 August 15 th Cash 100,000 Accounts Receivable 100,000 Question 2: Harwell Company manufactures automobile tires. On July 15, 2018, the company sold 1,400 tires to the Nixon Car Company for \$90 each. The terms of the sale were 3/10, n/30. Harwell uses the net method of accounting for cash discounts. 1. Prepare the journal entries to record the sale on July 15 (ignore cost of goods) and payment on July 23, 2018. July 15 th Accounts Receivable 122,220 Sales Revenue 122,220

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July 23 rd Cash 122,220 Accounts Receivable 122,220 .97 x 126,000 = 122,000 Use .97 cause 3% discount 2. Prepare the journal entries to record the sale on July 15 (ignore cost of goods) and payment on August 15, 2018. July 15 th Accounts Receivable 122,220 Sales Revenue 122,220 August 15 th Cash 126,000 Accounts Receivable 122,220 Sales Discount Forfeited 3,780 126,000 – 122,220 = 3,780 Question 3: Halifax Manufacturing allows its customers to return merchandise for any reason up to 90 days after delivery and receive a credit to their accounts. All of Halifax's sales are for credit (no cash is collected at the time of sale). The company began 2018 with an allowance for sales returns of \$400,000. During 2018, Halifax sold merchandise on account for \$12,500,000. This merchandise cost Halifax \$8,750,000 (70% of selling prices). Also during the year, customers returned \$613,000 in sales for credit. Sales returns, estimated to be 5% of sales, are recorded as an adjusting entry at the end of the year. 1. Prepare the entry to record the merchandise returns and the year-end adjusting entry for estimated returns. Note: Record the estimated returns at net amounts.
• Fall '14
• sherin
• Generally Accepted Accounting Principles, Uncollectible Accounts

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