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Chapter06 - Chapter 6 Reporting and Interpreting Sales...

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Chapter 6 Reporting and Interpreting Sales Revenue and Accounts Receivable Acct 2301 Zining Li
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2 Key Terms Sales revenues Sales returns Sales discount ( 2/10, n/30) Credit card discount All of these three are contra-revenue accounts Accounts receivable Allowance for doubtful account (contra-asset account) Net realizable value of A/R Bad debt expense
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3 Accounting for Sales Revenue Sales Revenue Less: Credit card discounts (a contra-revenue account) Sales discounts (a contra-revenue account) Sales returns and allowances (a contra-revenue account) Net Sales (reported on the income statement) Sales (revenue) reported on the Income Statement are net of credit card sales discount, sales discount, and sale returns.
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4 Accounting for Credit Card Discount Assume the credit card company charges a fee of 3% When sales of $1,000 are made by credit card purchases: Dr. Cash $970 Dr. Credit-card discount 30 Cr: Sales Revenue $1,000
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5 Accounting for Sales Discount Suppose the credit term is 2/10, n/30 When sales of $1,000 are made on account Dr. Accounts Receivable $1,000 Cr: Sales Revenue $1,000 When customers pay within 10 days, they enjoy 2% discount Dr. Cash $980 Dr. Sales Discount 20 Cr. Accounts Receivable $1,000 When customers pay after 10 days, they have to pay the full amount Dr. Cash $1,000 Cr. Accounts Receivable $1,000
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6 Accounting for Sales Returns When sales of $1,000 are made on account Dr. Accounts Receivable $1,000 Cr: Sales Revenue $1,000 When returns of $150 are made Dr. Sales Return $150 Cr. Accounts Receivable $150 When customers pay off the rest Dr. Cash $850 Cr. Accounts Receivable $850
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7 E6-3: Clem Retailers Nov 20: sold two items of merchandise to Customer B, who charged the $350 sales price on her visa card. Visa charges Clem a 2% credit card fee Nov 25: sold 20 items of merchandise to Customer C at an invoice price of $4,500 (total); terms 3/10, n/30. Nov 28: sold 10 identical items of merchandise to Customer D at an invoice price of $9,000 (total); terms 3/10, n/30. Nov 29: Customer D returned one of the items purchased on Nov 28th; the item was defective and credit was given to the customer Dec 06: Customer D paid the account balance in full Dec 20: Customer C paid in full for the invoice of Nov 25 Required: 1. Provide journal entries for above transactions when necessary.
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