Question

The following data were selected from the records of Sykes Company for the year ended December 31, 2014.
Balances January 1, 2014
Accounts receivable (various customers) $ 122,000
Allowance for doubtful accounts 8,000
In the following order, except for cash sales, the company sold merchandise and made collections on credit terms 5/10, n/30 (assume a unit sales price of $900 in all transactions and use the gross method to record sales revenue).
Transactions during 2014
a. Sold merchandise for cash, $248,000.
b. Sold merchandise to R. Smith; invoice price, $11,500.
c. Sold merchandise to K. Miller; invoice price, $29,000.
d.
Two days after purchase date, R. Smith returned one of the units purchased in (b) and received account credit.
e. Sold merchandise to B. Sears; invoice price, $23,000.
f. R. Smith paid his account in full within the discount period.
g. Collected $92,000 cash from customer sales on credit in prior year, all within the discount periods.
h. K. Miller paid the invoice in (c) within the discount period.
i. Sold merchandise to R. Roy; invoice price, $18,500.
j.
Three days after paying the account in full, K. Miller returned seven defective units and received a cash refund.
k. After the discount period, collected $6,000 cash on an account receivable on sales in a prior year.
l. Wrote off a 2013 account of $5,000 after deciding that the amount would never be collected.
m. The estimated bad debt rate used by the company was 1.0 percent of credit sales net of returns.
Required:
1. Using the following categories, indicate the effect of each listed transaction, including the write-off of the uncollectible account and the adjusting entry for estimated bad debts (ignore cost of goods sold). The first transaction is used as an example. (Round your answers to the nearest whole dollar amount. Amounts to be deducted should be indicated by a minus sign.)
Transactions | Sales Revenue | Sales discounts | Sales Returns and Allowances | Bad Debt
a
b
c
d
e
f
g
h
i
j
k
l
m
Show how the accounts related to the preceding sale and collection activities should be reported on the 2014 income statement. (Treat sales discounts as a contra-revenue.)
Sales renenue
Less: Sales and return
Sales discounts
Net sales revenue
Operating expenses
Bad debt expenses

Answer 1

Answer:

Sales Revenue: 316,000

Sales Discounts Taken: 2680

Sales Returns and Allowances: 4000

Bad Debt Expense: 1155

Explanation:

A. Sales Revenue- 235,000

B. Sales Revenue- 11,500

C. Sales Revenue- 26,500

D. Sales Returns and Allowances- 500

E. Sales Revenue- 24,000

F. Sales Discounts (Taken)- 220

G. Sales Discounts (Taken)

(Sales discounts (taken) $98,000 ÷ (1 - 0.02) = $100,000 gross sales; $100,000 × 0.02 = $2,000)

H. Sales Discounts (Taken)- 530

I. Sales Revenue- 19,000

J. Sales Discounts (Taken) - (70)

Sales Returns and Allownaces- 3500

K.

L.

M. Bad Debt Expense

Credit sales ($11,500 + $26,500 + $24,000 + $19,000) =$81,000

Less: Sales returns ($500 + $3,500)= 4,000

______________________________

Net sales revenue

77,000

Estimated bad debt rate

× 1.5 %

_____________________________

Bad debt expense

+$1,155