Mar 1 sold 20000 of merchandise to potter company

Info icon This preview shows pages 22–24. Sign up to view the full content.

View Full Document Right Arrow Icon
Mar. 1 Sold $20,000 of merchandise to Potter Company, terms 2/10, n/30. 11 Received payment in full from Potter Company for balance due. 12 Accepted Juno Company’s $20,000, 6-month, 12% note for balance due. 13 Made Falcetto Company credit card sales for $13,200. 15 Made Visa credit card sales totaling $6,700.A 3% service fee is charged by Visa. Apr. 11 Sold accounts receivable of $8,000 to Harcot Factor. Harcot Factor assesses a service charge of 2% of the amount of receivables sold. 13 Received collections of $8,200 on Falcetto Company credit card sales and added finance charges of 1.5% to the remaining balances. May 10 Wrote off as uncollectible $16,000 of accounts receivable. Falcetto uses the percentage-of-sales basis to estimate bad debts. June 30 Credit sales recorded during the first 6 months total $2,000,000.The bad debt percentage is 1% of credit sales.At June 30, the balance in the allowance account is $3,500. July 16 One of the accounts receivable written off in May was from J. Simon, who pays the amount due, $4,000, in full. Instructions Prepare the journal entries for the transactions. Solution to Comprehensive DO IT! Mar. 1 Accounts Receivable–Potter 20,000 Sales 20,000 (To record sales on account) 11 Cash 19,600 Sales Discounts (2% H11003 $20,000) 400 Accounts Receivable—Potter 20,000 (To record collection of accounts receivable) 12 Notes Receivable 20,000 Accounts Receivable—Juno 20,000 (To record acceptance of Juno Company note) 13 Accounts Receivable 13,200 Sales 13,200 (To record company credit card sales) 15 Cash 6,499 Service Charge Expense (3% H11003 $6,700) 201 Sales 6,700 (To record credit card sales) Apr. 11 Cash 7,840 Service Charge Expense (2% H11003 $8,000) 160 Accounts Receivable 8,000 (To record sale of receivables to factor) 13 Cash 8,200 Accounts Receivable 8,200 (To record collection of accounts receivable) action plan a20 Generally, record accounts receivable at invoice price. a20 Recognize that sales returns and allowances and cash discounts reduce the amount received on accounts receivable. a20 Record a service charge expense on the seller’s books when accounts receivable are sold. a20 Prepare an adjusting entry for bad debts expense. a20 Ignore any balance in the allowance account under the percentage-of-sales basis. Recognize the balance in the allowance account under the percentage-of-receivables basis. a20 Record write-offs of accounts receivable only in balance sheet accounts. Comprehensive Do It! 417 PDF Watermark Remover DEMO : Purchase from to remove the watermark
Image of page 22

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
418 Chapter 9 Accounting for Receivables SUMMARY OF STUDY OBJECTIVES 1 Identify the different types of receivables. Receivables are frequently classified as (1) accounts, (2) notes, and (3) other. Accounts receivable are amounts customers owe on account. Notes receivable are claims for which lenders issue formal instruments of credit as proof of the debt. Other receivables include nontrade receivables such as interest receivable, loans to company officers, advances to employees, and income taxes refundable.
Image of page 23
Image of page 24
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern