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LN07-ch7-LectureProblems-AFM101s10

# LN07-ch7-LectureProblems-AFM101s10 - Chapter 7 Exercise 1(1...

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Chapter 7 – Exercise 1 (1 of 14) StarTrac Company entered into the following transactions during the year ended December 31, 20A. The company sells merchandise (unit sales price \$1,000) on account to customers with invoice terms of “2/10, n/30” and uses the gross method to record sales revenue. Transactions during the year include the following: 1. Sold merchandise for cash, \$13,000. 2. Sold merchandise to Drafke; invoice price, \$5,000. 3. Sold merchandise to Murdock; invoice price, \$3,000. 4. Two days after he purchased the merchandise in (2), Drafke returned two of the units and received account credit. 5. Sold merchandise to Patel; invoice price \$16,000. 6. Drafke paid his account in full within ten days of the invoice date. 7. Patel paid her account in full twelve days after the date of invoice in (5). 8. Ten days after paying his account balance in full, Drafke returned two additional units (because the units were defective) and received a cash refund. 9. StarTrac wrote-off Murdock’s account balance after deciding the amount would never be collected. 10. Six months later, a cheque in the amount of \$300 was received from Murdock. 11. Estimated bad debt expense for the year was \$4,000.

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Chapter 7 – Exercise 1 (2 of 14) Trans- action Sales revenue Sales Discounts (taken) Sales Returns and Allowances Bad Debt Expense 1 + \$13,000 no effect no effect no effect 2 3 4 5 6 7 8 9 10 Part A: Complete the following table by indicating the effect of each transaction.
Chapter 7 – Exercise 1 (13 of 14) Part B :

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LN07-ch7-LectureProblems-AFM101s10 - Chapter 7 Exercise 1(1...

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