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Chapter 7: Question 4 (page 363)

Roeher Company sold \(9,000 of its specialty shelving to Elkins Office Supply Co. on account. Prepare the entries when (a) Roeher makes the sale, (b) Roeher grants an allowance of \)700 when some of the shelving does not meet exact specifications but still could be sold by Elkins, and (c) at year-end; Roeher estimates that an additional $200 in allowances will be granted to Elkins.

Short Answer

Expert verified

Both debit and credit sides of the journal totals $9,900.

Step by step solution

01

Definition of Sales Revenue

The benefits generated by providingservices or products to the customers against consideration are known as sales revenue.

02

Journal entries

Date

Accounts and Explanation

Debit $

Credit $

a

Accounts receivables

$9,000

Sales revenue

$9,000

b

Sales return and allowance

$700

Accounts receivables

$700

c

Sales return and allowance

$200

Accounts receivables

$200

$9,900

$9,900

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Most popular questions from this chapter

(Petty Cash, Bank Reconciliation) Bill Jovi is reviewing the cash accounting for Nottleman, Inc., a local mailing service. Jovi鈥檚 review will focus on the petty cash account and the bank reconciliation for the month ended May 31, 2017. He has collected the following information from Nottleman鈥檚 bookkeeper for this task.

Petty Cash

1. The petty cash fund was established on May 10, 2017, in the amount of \(250.

2. Expenditures from the fund by the custodian as of May 31, 2017, were evidenced by approved receipts for the following.

Postage expenses

\)33.00

Mailing Labels and Other Supplies

65.00

I.O.U from employees

30.00

Shipping charges

57.45

Newspaper advertising

22.80

Miscellaneous expenses

15.35

On May 31, 2017, the petty cash fund was replenished and increased to \(300; currency and coin in the fund at that time totaled \)26.40.

Bank Reconciliation

THIRD NATIONAL BANK

BANK STATEMENT

Disbursements

Receipts

Balance

Balance 1 May, 2017

\(8,769

Deposits

\)28,000

Note payment direct from customer (\(30)

930

Check clearing during May

\)31,150

Bank service charges

27

Balance 31 May, 2017

6,522

Nottleman鈥檚 Cash Account

Balance 1 May 2017

\(8,850

Deposit during May 2017

31,000

Checks written during May 2017

(31,835)

Deposits in transit are determined to be \)3,000, and checks outstanding at May 31 total \(850. Cash on hand (besides petty cash) at May 31, 2017, is \)246.

Instructions

(a) Prepare the journal entries to record the transactions related to the petty cash fund for May.

(b) Prepare a bank reconciliation dated May 31, 2017, proceeding to a correct cash balance, and prepare the journal entries necessary to make the books correct and complete.

(c) What amount of cash should be reported in the May 31, 2017, balance sheet?

(Notes Receivable with Realistic Interest Rate) On October 1, 2017, Arden Farm Equipment Company sold a pecan-harvesting machine to Valco Brothers Farm, Inc. In lieu of a cash payment Valco Brothers Farm gave Arden a 2-year, $120,000, 8% note (a realistic rate of interest for a note of this type). The note required interest to be paid annually on October 1. Arden鈥檚 financial statements are prepared on a calendar-year basis.

Instructions

Assuming Valco Brothers Farm fulfills all the terms of the note, prepare the necessary journal entries for Arden Farm Equipment Company for the entire term of the note.

On October 1, 2017, Chung, Inc. assigns \(1,000,000 of its accounts receivable to Seneca National Bank as collateral for a \)750,000 note. The bank assesses a finance charge of 2% of the receivables assigned and interest on the note of 9%. Prepare the October 1 journal entries for both Chung and Seneca.

Wilton, Inc. had net sales in 2017 of \(1,400,000. At December 31, 2017, before adjusting entries, the balances in selected accounts were Accounts Receivable \)250,000 debit, and Allowance for Doubtful Accounts $2,400 credit. If Wilton estimates that 8% of its receivables will prove to be uncollectible, prepare the December 31, 2017, journal entry to record bad debt expense.

Dold Acrobats lent \(16,529 to Donaldson, Inc., accepting Donaldson鈥檚 2-year, \)20,000, zero-interest-bearing note. The implied interest rate is 10%. Prepare Dold鈥檚 journal entries for the initial transaction, recognition of interest each year, and the collection of $20,000 at maturity.
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