Spiceland Chpt 5 Assigned Homework Solutions

Spiceland Chpt 5 Assigned Homework Solutions - Chapter 5...

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Chapter 5 Homework Solutions – Spiceland Question 5-3 Trade discounts represent a reduction in the listed price of a product or service. A sales discount represents a reduction, not in the selling price of a product or service, but in the amount to be paid by a credit customer if paid within a specified period of time. Sales discounts are reported as contra revenues in the income statement. Question 5-4 Sales Returns and Allowances is a contra revenue account and therefore has a normal debit balance. Sales Returns and Allowances occur when: a customer returns a product, or the seller reduces the customer’s balance owed or provides at least a partial refund because of some deficiency in the company’s product or service. Sales Returns and Allowances is reported as a contra revenue amount in the income statement. Question 5-7 The two purposes include reducing accounts receivable to their net realizable value (or amount expected to be collected) and matching expenses (bad debts) in the same period as the revenue (credit sales) they help to generate. Question 5-11 A debit balance in the allowance for uncollectible accounts before adjustment could occur if actual bad debts in the current year exceed the previous year’s estimate of bad debts. Question 5-12 Net realizable value is the amount of cash the firm expects to collect. Net realizable value is equal to accounts receivable minus the allowance for uncollectible accounts. Question 5-13 The entry to write off an account as uncollectible includes a debit to the allowance for uncollectible accounts and a credit to accounts receivable for the amount being written off. The write-off entry has no effect on total assets or net income at the time of the write-off. Question 5-23 The entry to record interest earned but not yet received includes a debit to interest receivable and a credit to interest revenue. The amount of the entry is calculated as the face value of the note times the annual interest rate times the fraction of the year the note is outstanding.
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Chapter 5 Homework Solutions – Spiceland Pg. 2 Exercise 5-1 May 7 Debit Credit Accounts Receivable 3,000 Service Revenue
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Spiceland Chpt 5 Assigned Homework Solutions - Chapter 5...

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