Connect - another Financial Accounting, Chapter 7

1.

Prepare journal entries for the following credit card sales transactions (the company uses the perpetual inventory system).

1. Sold $29,000 of merchandise, that cost $22,200, on MasterCard credit cards. MasterCard charges a 5% fee.
2. Sold $5,900 of merchandise, that cost $3,450, on an assortment of bank credit cards. These cards charge a 4% fee.

No	Transaction	General Journal	Debit	Credit
1	1-a.	Cashselected answer correct	27,550selected answer correct	not attempted
		Credit card expenseselected answer correct	1,450selected answer correct	not attempted
		Salesselected answer correct	not attempted	29,000selected answer correct
2	1-b.	Cost of goods soldselected answer correct	22,200selected answer correct	not attempted
		Merchandise inventoryselected answer correct	not attempted	22,200selected answer correct
3	2-a.	Cashselected answer correct	5,664selected answer correct	not attempted
		Credit card expenseselected answer correct	236selected answer correct	not attempted
		Salesselected answer correct	not attempted	5,900selected answer correct
4	2-b.	Cost of goods soldselected answer correct	3,450selected answer correct	not attempted
		Merchandise inventoryselected answer correct	not attempted	3,450selected answer correct

----------------------------------------------------------------------------------- 2. Levine Company uses the perpetual inventory system and allows customers to use two credit cards in charging purchases. With the Suntrust Bank Card, a 4% service charge for credit card sales is assessed. The second credit card that Levine accepts is the Continental Card. Continental assesses a 2.5% charge on sales for using its card.   Apr.   8   Sold merchandise for $7,300 (that had cost $5,395) and accepted the customer's Suntrust Bank Card.     12   Sold merchandise for $6,800 (that had cost $4,406) and accepted the customer's Continental Card. Prepare journal entries to record the above selected credit card transactions of Levine Company. (Round your answers to the nearest whole dollar amount.) No Date General Journal Debit Credit 1 Apr 08 Cashselected answer correct 7,008selected answer correct not attempted Credit card expenseselected answer correct 292selected answer correct not attempted Salesselected answer correct not attempted 7,300selected answer correct 2 Apr 08 Cost of goods soldselected answer correct 5,395selected answer correct not attempted Merchandise inventoryselected answer correct not attempted 5,395selected answer correct 3 Apr 12 Cashselected answer correct 6,630selected answer correct not attempted Credit card expenseselected answer correct 170selected answer correct not attempted Salesselected answer correct not attempted 6,800selected answer correct 4 Apr 12 Cost of goods soldselected answer correct 4,406selected answer correct not attempted Merchandise inventoryselected answer correct not attempted 4,406selected answer correct ----------------------------------------------------------------------------------- 3. Z-Mart uses the perpetual inventory system and allows customers to use the Z-Mart store credit card in charging purchases. Z-Mart assesses a per-month interest fee for any unpaid balance on its store credit card at each month-end.   Apr.   30   Z-Mart sold merchandise for $1,300 (that had cost $800) and accepted the customer’s Z-Mart store credit card. May   31   Z-Mart recorded $7 of interest earned from its store credit card as of this month-end.  Prepare journal entries to record the above selected credit card transactions of Z-Mart. No Date General Journal Debit Credit 1 Apr 30 Accounts receivableselected answer correct 1,300selected answer correct not attempted Salesselected answer correct not attempted 1,300selected answer correct 2 Apr 30 Cost of goods soldselected answer correct 800selected answer correct not attempted Merchandise inventoryselected answer correct not attempted 800selected answer correct 3 May 31 Accounts receivableselected answer correct 7selected answer correct not attempted Interest revenueselected answer correct not attempted 7selected answer correct ----------------------------------------------------------------------------------- 4. Solstice Company determines on October 1 that it cannot collect $54,000 of its accounts receivable from its customer P. Moore. Apply the direct write-off method to record this loss as of October 1. No Date General Journal Debit Credit 1 Oct 01 Bad debts expenseselected answer correct 54,000selected answer correct not attempted Accounts receivable—P. Mooreselected answer correct not attempted 54,000selected answer correct ----------------------------------------------------------------------------------- 5. Solstice Company, which uses the direct write-off method, determines on October 1 that it cannot collect $69,000 of its accounts receivable from its customer P. Moore. On October 30, P. Moore unexpectedly paid his account in full to Solstice company.   Record Solstice's entries to reflect recovery of this bad debt. No Date General Journal Debit Credit 1 Oct 30 Accounts receivable—P. Mooreselected answer correct 69,000selected answer correct not attempted Bad debts expenseselected answer correct not attempted 69,000selected answer correct 2 Oct 30 Cashselected answer correct 69,000selected answer correct not attempted Accounts receivable—P. Mooreselected answer correct not attempted 69,000selected answer correct ----------------------------------------------------------------------------------- 6. Gomez Corp. uses the allowance method to account for uncollectibles. On January 31, it wrote off an $1,800 account of a customer, C. Green. On March 9, it receives a $1,300 payment from Green.  Prepare the journal entry for January 31 and March 9. Assume no additional money is expected from Green for March 9. No Date General Journal Debit Credit 1 Jan 31 Allowance for doubtful accountsselected answer correct 1,800selected answer correct not attempted Accounts receivable—C. Greenselected answer correct not attempted 1,800selected answer correct 2 Mar 09 Accounts receivable—C. Greenselected answer correct 1,300selected answer correct not attempted Allowance for doubtful accountsselected answer correct not attempted 1,300selected answer correct 3 Mar 09 Cashselected answer correct 1,300selected answer correct not attempted Accounts receivable—C. Greenselected answer correct not attempted 1,300selected answer correct ----------------------------------------------------------------------------------- 7. Warner Company's year-end unadjusted trial balance shows accounts receivable of $108,000, allowance for doubtful accounts of $690 (credit), and sales of $370,000. Uncollectibles are estimated to be 0.50% of sales.   Prepare the December 31 year-end adjusting entry for uncollectibles. No Date General Journal Debit Credit 1 Dec 31 Bad debts expenseselected answer correct 1,850selected answer correct not attempted Allowance for doubtful accountsselected answer correct not attempted 1,850selected answer correct ----------------------------------------------------------------------------------- 8. At year-end (December 31), Chan Company estimates its bad debts as 0.50% of its annual credit sales of $846,000. Chan records its Bad Debts Expense for that estimate. On the following February 1, Chan decides that the $423 account of P. Park is uncollectible and writes it off as a bad debt. On June 5, Park unexpectedly pays the amount previously written off.   Prepare the journal entries for these transactions. No Date General Journal Debit Credit 1 Dec 31 Bad debts expenseselected answer correct 4,230selected answer correct not attempted Allowance for doubtful accountsselected answer correct not attempted 4,230selected answer correct 2 Feb 01 Allowance for doubtful accountsselected answer correct 423selected answer correct not attempted Accounts receivable—P. Parkselected answer correct not attempted 423selected answer correct 3 Jun 05 Accounts receivable—P. Parkselected answer correct 423selected answer correct not attempted Allowance for doubtful accountsselected answer correct not attempted 423selected answer correct 4 Jun 05 Cashselected answer correct 423selected answer correct not attempted Accounts receivable—P. Parkselected answer correct not attempted 423selected answer correct ----------------------------------------------------------------------------------- 9. Warner Company's year-end unadjusted trial balance shows accounts receivable of $107,000, allowance for doubtful accounts of $680 (credit), and sales of $360,000. Uncollectibles are estimated to be 1.50% of accounts receivable.   1. Prepare the December 31 year-end adjusting entry for uncollectibles. No Date General Journal Debit Credit 1 Dec 31 Bad debts expense 107000*1.5%-680selected answer correct 925selected answer correct not attempted Allowance for doubtful accountsselected answer correct not attempted 925selected answer correct 2. What amount would have been used in the year-end adjusting entry if the allowance account had a year-end unadjusted debit balance of $700? 107000*1.5%+700 Amount used in the year-end adjusting entry $2,305selected answer correct ----------------------------------------------------------------------------------- 10. At each calendar year-end, Mazie Supply Co. uses the percent of accounts receivable method to estimate bad debts. On December 31, 2017, it has outstanding accounts receivable of $53,500, and it estimates that 5% will be uncollectible.   Prepare the adjusting entry to record bad debts expense for year 2017 under the assumption that the Allowance for Doubtful Accounts has: (a) a $910 credit balance before the adjustment. (b) a $268 debit balance before the adjustment. No Transaction General Journal Debit Credit 1 (a) Bad debts expense 53500*5%-910selected answer correct 1,765selected answer correct not attempted Allowance for doubtful accountsselected answer correct not attempted 1,765selected answer correct 2 (b) Bad debts expense 53500*5%+268selected answer correct 2,943selected answer correct not attempted Allowance for doubtful accountsselected answer correct not attempted 2,943selected answer correct ----------------------------------------------------------------------------------- 11. On August 2, Jun Co. receives a $6,600, 90-day, 12% note from customer Ryan Albany as payment on his $6,600 account.   1. Compute the maturity date for the above note. October 29 October 30 October 31  November 1 November 2 2. Prepare Jun's journal entry for August 2. No Date General Journal Debit Credit 1 Aug 02 Notes receivable—R. Albanyselected answer correct 6,600selected answer correct not attempted Accounts receivable—R. Albanyselected answer correct not attempted 6,600selected answer correct ---------------------------------------------------------------------------------- 12. On August 2, Jun Co. receives a $7,200, 90-day, 12.5% note from customer Ryan Albany as payment on his $7,200 account.   Prepare Jun's journal entry assuming the note is honored by the customer on October 31 of that same year. (Round your answers to nearest whole dollar value. Use 360 days a year.) No Date General Journal Debit Credit 1 Oct 31 Cashselected answer correct 7,425selected answer correct not attempted Notes receivable—R. Albanyselected answer correct not attempted 7,200selected answer correct Interest revenue 7200*12.5% * 90/360selected answer correct not attempted 225selected answer correct ---------------------------------------------------------------------------------- 13. Daw Company's December 31 year-end unadjusted trial balance shows a $26,000 balance in Notes Receivable. This balance is from one 6% note dated December 1, with a period of 45 days. Assume Daw Company does not prepare reversing entries.   Prepare journal entries for December 31 and for the note's maturity date assuming it is honored. (Use 360 days a year.) No Date General Journal Debit Credit 1 Dec 31 Interest receivableselected answer correct 130selected answer correct not attempted Interest revenueselected answer correct not attempted 130selected answer correct 2 Jan 15 Cashselected answer correct 26,195selected answer correct not attempted Interest receivable 26000*6%* 30/360selected answer correct not attempted 130selected answer correct Interest revenue 26000*6%* 15/360selected answer correct not attempted 65selected answer correct Notes receivableselected answer correct not attempted 26,000selected answer correct