Mgmt 200 Spring 2011 Chapter 5

Mgmt 200 Spring 2011 Chapter 5 - 2/18/2011 1 Sales and...

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Unformatted text preview: 2/18/2011 1 Sales and Accounts Receivable Chapter 5 RECORDING SALES 1. Cash Sales 2. Credit Card Sales 3 Credit Sale 3. Credit Sales 4. Trade discounts, 10%-off coupons, etc 5. Sales Discounts 6. Sales Returns and Allowances Exercise 5-2 Merry Maidens Cleaning generally charges $200 for a detailed cleaning of a normal- size home. However, to generate additional business, Merry Maidens is offering a new- customer discount of 10%. On May 1, Ms. E. Pearson has Merry Maidens clean her house and pays cash equal to the discounted price. Required: Record the revenue earned by Merry Maidens Cleaning on May 1. 2/18/2011 2 Exercise 5-6 On April 25, Foreman Electric installs wiring in a new home for $2,500 on account. However, on April 27, Foremans electrical work does not pass inspection, and Foreman grants the customer an allowance of $500 because of the problem. The customer makes full payment of the balance owed, excluding the allowance, on April 30. Required: 1. Record the credit sale on April 25. 2. Record the sales allowance on April 27. 3. Record the cash collection on April 30. 4. Calculate net sales associated with these transactions. Valuation of Accounts Receivable Creation of Accounts Receivable Subsidiary Ledger Recording bad debt expense Writing off a bad debt Recovery of a bad debt previously written off. Balance sheet presentation Accounts Receivable Money owed to us by customers Trade, non trade receivable Accounts, Notes receivable Related party receivables Journal entry: Accounts receivable $500 Sales revenue $500 2/18/2011 3 Subsidiary Ledger Control Account (General Ledger) Aggregate, total accounts receivable Balance is sum of the account balances in the Subsidiary ledger Subsidiary Ledger Includes an account for each individual Bad debts Journal entry for collection: Cash $500 Accounts receivable $500 What if not collected? Bad debt expense Direct write-off method Matching Principle Allowance method Allowance for bad debts Journal entry for estimated bad debts: Bad debt expense $30 Allowance for uncollectible accounts $30 Journal entry to write-off a bad debt: Allowance for uncollectible accounts $12 Accounts receivable $12 2/18/2011 4 Collection of a bad debt previously written off....
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Mgmt 200 Spring 2011 Chapter 5 - 2/18/2011 1 Sales and...

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