Page 404 - Accounting Principles (A Business Perspective)

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Sales 1,680,000

Sales returns and allowances 30,000
a. Prepare journal entries to record all of these transactions and the uncollectible accounts expense for the
period. Assume the estimated expense is 2 per cent of net sales.
b. Give the entry to record the estimated expense for the period if the allowance account is to be adjusted to 5
per cent of outstanding receivables instead of as in (a).
Alternate problem B The cash register at Frank's Restaurant at the close of business showed cash sales of

USD 7,500 and credit card sales of USD 10,000 (USD 6,000 VISA and USD 4,000 American Express). The VISA
(bank credit card) invoices were discounted 5 per cent when they were deposited. The American Express (nonbank
credit card) charges were mailed to the company and were subject to a 5 per cent service charge. A few days later,
Frank received a check for the net amount of the American Express credit card charges.
Prepare journal entries for all of these transactions.
Alternate problem C Beacham Hardware, Inc., sells merchandise in a state that has a 6 per cent sales tax. On
2010 July 1, it sold goods with a sales price of USD 20,000 on credit. Sales taxes collected are recorded in a separate
account. Assume that sales for the entire month were USD 400,000. On 2010 July 31, the company remitted the
sales taxes collected to the state taxing agency.

a. Prepare the general journal entries to record the July 1 sales revenue and sales tax payable. Also prepare the
entry to show the remittance of the taxes on July 31.
b. Now assume that the merchandise sold also is subject to federal excise taxes of 10 per cent in addition to the 6
per cent sales tax. The company remitted the federal excise taxes collected to the proper agency on July 31. Show
the entries on July 1 and July 31.
Alternate problem D Quick Wheels, Inc., sells racing bicycles and warrants all parts for one year. The average
price per bicycle is USD 560, and the company sold 4,000 in 2009. The company expects 20 per cent of the bicycles

to develop defective parts within one year of sale. The estimated average cost of warranty repairs per defective
bicycle is USD 40. By the end of the year, 500 bicycles sold that year had been returned and repaired under
warranty. On 2010 January 2, a customer returned a bicycle purchased in 2009 for repairs under warranty. The
repairs were made on January 3. The cost of the repairs included parts, USD 25, and labor, USD 15.
a. Calculate the amount of the estimated product warranty payable.
b. Prepare the entry to record the estimated product warranty payable on 2009 December 31.
c. Prepare the entry to record the repairs made on 2010 January 3.
Alternate problem E Vance Commercial Properties, Inc., has an accounting period of one year, ending on
July 31. On 2009 July 1, the balances of certain ledger accounts are Notes Receivable, USD 654,000; and Notes

Payable, USD 900,000. A schedule of the notes receivable is as follows:
Face Date Interest
Amount Maker of Note Life Rate
$ 270,000 Parker Co. 2009/5/15 60 days 12%
120,000 Dot Co. 2009/5/31 60 12
264,000 Fixx Co. 2009/6/15 30 10
$654,000
The note payable is a 60-day bank loan dated 2009 May 20. Notes Payable—Discount was debited for the
discount of USD 6,000. Following are the company's transactions during July:

Accounting Principles: A Business Perspective 405 A Global Text