ACT3391FALL2010TraditionalHomework22to31solution

ACT3391FALL2010TraditionalHomework22to31solution - HOMEWORK...

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HOMEWORK FALL 2010 ACT3391 22. (4 points) On December 31, 2010, M sold some inventory to X in exchange for a $25,000 10% note receivable. The note principal will be collected as follows - $5,000 on December 31, 2011, $15,000 on December 31, 2012 and $5,000 on December 31, 2013. Interest will be collected every December 31 starting December 31, 2011. Under normal market conditions, M would only accept a note with a stated rate of 12%. The cost of the inventory sold was $10,000. Prepare the journal entries that M should make on 12-31-10, 12-31-11, 12-31-12, and 12-31-13. $ 7,500 x 0.89286 = 6,696 $17,000 x 0.79719 = 13,552 $ 5,500 x 0.71178 = 3,915 24,163 12-31-10 Notes receivable 25,000 Sales revenue 24,163 Discount on NR 837 Cost of goods sold 10,000 Inventory 10,000 12-31-11 Cash 7,500 Discount on NR 400 Interest revenue 2,900 25,000 – 837 = 24,163 x 12% = 2,900 Notes receivable 5,000 12-31-12 Cash 17,000 Discount on NR 348 Interest revenue 2,348 20,000 – 437 = 19,563 x 12% = 2,348 Notes receivable 15,000 12-31-13 Cash 5,500 Discount on NR 89 Notes receivable 5,000 Interest revenue 589 5,000 – 89 = 4,911 x 12% = 589 23. (1 point) Dynasty Company uses the gross method to record sales made on credit. On August 1, 2010, Dynasty made credit sales of $200,000 with terms of 2/15, n/60. On August 12, 2010, Dynasty received full payment for the August 1, 2010 sale. Prepare the journal entries Dynasty should make on August 1, 2010 and August 12, 2010. August 1: AR 200,000 August 1: Cash 196,000 Sales 200,000 Sales discount 4,000 AR 200,000 24. (4 points) A trial balance before adjustments included the following: Debit Credit Sales $500,000 Sales returns and allowance $10,000 Accounts receivable 50,000 Allowance for doubtful accounts 5,000 Prepare the proper adjusting journal entry for each of the following situations: o The estimate of uncollectibles is made by taking 4% of gross sales: 4% x $500,000 = 20,000 Bad debt expense $20,000 Allowance for doubtful accounts $20,000 o The estimate of uncollectibles is made by taking 5% of net sales: 5 % x $490,000 = 24,500 Bad debt expense $24,500 Allowance for doubtful accounts $24,500 o
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