Q.

1 Part I

a) Net method Debit Credit

31-Mar Cash $ 12,000.00

Sales Discounts Forfeited $ 120.00
Accounts Receivable $ 11,880.00

b) Gross Method
31-Mar Cash $ 12,000.00
Accounts Receivable $ 12,000.00

Part II a)
31-Mar Sales Returns and Allowances $ 75,000.00
Allowances for Sales Returns and Allowances $ 75,000.00

It is important to include an estimate of sales return and allowance entry in

Sawyer Corporation’s financial statements as sales returns and allowances
should be recognized in the period of the sale to avoid overstating accounts
receivable and sales. Sales returns and allowances are therefore estimated
Part II b and adjusted at the end of each reporting period.If estimated returns and
allowances are significant, an allowance for sales returns and allowances
account, which is an asset valuation account contra to accounts receivable,
is used to record the estimates.

Part III a)
Bad Debt Expense $ 5,270.00
Allowance for Doubtful Accounts $ 5,270.00
($120,000*5%)-730

Part III b)
Bad Debt Expense $ 5,020.00
Allowance for Doubtful Accounts $ 5,020.00
($510,000-8,000)*1%
Q 2. 1 Gross Method
Debit
28-Mar Accounts Receivable $ 3,200.00
Sales Revenue

29-Mar Sales Returns and Allowances $ 600.00

Accounts Receivable

3-Apr Cash $ 9,600.00

Sales Revenue

6-Apr Cash $ 4,548.00

Sales Discounts $ 52.00
Accounts Receivable

14-Apr Allowance for Doubtful Accounts $ 6,000.00

Accounts Receivable

25-Apr Cash $ 12,000.00

Accounts Receivable $ 12,000.00
Sales Revenue

30-May Accounts Receivable $ 2,000.00

Allowance for Doubtful Accounts

30-May Cash $ 2,000.00

Accounts Receivable

Q 2. 2

Not yet due 5% -

1-30 days past due 10% 12,000.00
More than 60 days over 20% 9,000.00
 Debit
Bad Debt Expense $ 6,000.00
Allowance for Doubtful Accounts

Q 2.3 Debit
Bad Debt Expense $ 2,056.00
Allowance for Doubtful Accounts

Credit Sales $ 191,000.00

Sales on Credit March 28 $ 3,200.00
Sales Returns and Allowances March 28 -$ 600.00
Sales on Credit April 25 $ 12,000.00
$ 205,600.00
1%
$ 2,056.00

Chelsea Corp ,using percentage of sales method, will incur lower bad debt expense

Percentage of receivables basis..... $ 6,000.00

Percentage of Credit sales basis $ 2,056.00
Lower bad debt expense with
percentage of sales basis by $ 3,944.00
Credit
$ 21,000.00
$ 3,200.00

$ 600.00

$ 9,600.00

$ 4,600.00

$ 6,000.00
6000 1000
2000
2056
$ 24,000.00 6000 5056 6056

$ 2,000.00 3-Apr-17
31-May-17
58
$ 2,000.00

- 9000
1,200.00 12000
1,800.00
 3,000.00

Credit A.R 6000 O.b 1000

Ar 2000
$ 6,000.00 Bad debt 6000
c/d 3000

Credit

$ 2,056.00

A.R 6000 O.b 1000

Ar 2000
Bad debt 2056
c/d 944

cur lower bad debt expense by 3944 compared to percentage of recievable basis, as shown
Q.3 PartI
Bank
Cash balance , September 2017 $ 20,000.00
Less: Cheques paid during October -$ 11,800.00
Less: Bank Service Charge for October -$ 200.00
$ 8,000.00
Add: Deposits recorded by bank in October $ 35,000.00

Cash Balance, October 2017 $ 43,000.00

Deposits recorded by bank in October. 43,000-20,000+11,800+200=35,00

Q.3 Part II
Balance per bank $ 30,000.00
Deposit in Transit $ 9,000.00
Outstanding Cheques -$ 24,000.00
Bank service charge $ 600.00
Bank Error $ 2,100.00
Cash Balance per books $ 17,700.00
0+11,800+200=35,000
Q.4
a.Torsten Manufacturing
Debit Credit
Cash $ 218,400.00
Due from Factor $ 12,000.00
Loss on Sale of Recievables $ 9,600.00
Accounts Receivable $ 240,000.00

b.Victor Factor Corp

Debit Credit
Accounts Receivable $ 240,000.00
Due to Customer $ 12,000.00
Financing Revenue $ 9,600.00
Cash $ 218,400.00
 9600
12000
Q.5
Debit
30-Nov-17 Bad Debt Expense $ 645.00
Allowance for Doubtful Accounts
$52,000-S$9,000=$43,000*1.5% = 645

Bad Debt Expense $ 10,250.00

Allowance for Doubtful Accounts
$7,000+$3,250=$10,250

Bad Debt Expense $ 7,130.00

Allowance for Doubtful Accounts
($97,000*4%)+$3,250=$7,130

Cash $ 22,500.00
Loss on sale of Receivables $ 2,500.00
Accounts Receivable
$25,000* 10%=$2,500
Credit

$ 645.00

$ 10,250.00

$ 7,130.00

$ 25,000.00