Cash Discounts And Returns On Sales

Financial Accounting
Assignment 1



Cantú y Cantú, Ernesto A00190616
Díaz Sánchez, Luis Alberto A01311241
López Moreno, Víctor Manuel A00780649






Monterrey, NL.
November 13th, 2011
 6-43 Entries for Cash Discounts and Returns on Sales.

The Yakima Wine Company, a wholesaler of Washington state wine, sells on credit terms of 2/10, n30. Consider thefollowing transactions:

June 9 Sales on credit to Pike Wine Mercantile, $30,000
June 11 Sales on credit to Marty’s Liquors, $15,000
June 18 Collected from Pike Wine Mercantile
June 26 Accepted the return of six cases from Marty’s, $1,000
July 10 Collected from Marty’s
July 12 Pike Wine Mercantile returned some defective wine that it had acquired on June 9 for $100. Yakima
Used a cash refundimmediately

Prepare journal entries for these transactions. Omit Explanations. Assume the full appropriate amounts were exchanged.

1. Account Receivable s 30,000
Sales Revenue 30,000

2. Account Receivables 15,000
Sales Revenue 15,000

3. Cash 29,400
Cash Discounts on sale 600
Account Receivables 30,000

4. Sales Return and Allowances1,000
Account Receivables 1,000

5. Cash 14,000
Account Receivables 14,000

6. Sales Return and Allowances 100
Cash 100


 6-45 Aging of Accounts

Consider the following analysis of Accounts Receivable, February 28, 20X0:

Name of Customer Total Remarks
Huang Nurseries $20,000 25% over 90 days,
75% 61-90 days
Michael’sLandscaping 8,000 75% 31-60 days,
25% under 30 days
Shoven Garden Supply 12,000 60% 61-90 days,
40% 31-60 days
Loring Farm 20,000 All under 30 days
Hjortshoj Florists 4,000 25% 61-90 days
75% 1-30 days
Other accounts (each detailed 80,000 50% 1-30 days,
30% 31-60 days,
15% 61-90 days,
5% over 90 days

Total144,000

Prepare an aging schedule, classifying ages into four categories: 1-30 days, 31-60 days, 61-90 days, and over 90 days. Assume that the prospective bad debt percentages for each category are 0.2%, 0.8%, 10%, and 85%, respectively. What is the ending balance in allowance for Uncollectible accounts?











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Aging of Accounts Receivable, February 28, 20X0Bad debt expense …………………………………………………… $11,486
Allowance for uncollectible accounts ………………………. $11,486


















6-68 Percentage of Sales and Percentage of Ending Accounts Receivables
Flagstaff Equipment Company had credit sales of $7 million during 20X0. Most customers paid promptly (within 30 days), but a few took longer; an average of 1.2% of creditsales were never paid. On December 31, 20X0, accounts receivable were $480,000. The allowance for Bad Debts account, before any recognition of 20X0 bad debts, had a $1,200 debit balance.
Flagstaff produces and sells mountaineering equipment and other outdoor gear. Most of the sales (about 80%) come in the period of March through August; the other 20% is spread almost evenly over the other 6months. Over the last 6 years, and average of 18% of the December 31 balance in accounts receivable has not been collected.


1. Suppose Flagstaff Equipment uses the percentage of sales method to calculate an allowance for bad debts. Present the accounts receivable and allowance accounts as they should appear on the December 31, 20X0, balance sheet. Give the journal entry required to recognizethe bad debts expense for 20X0.



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|Journal Entry | | | | | |
| | Allowance for uncollectible accounts…………………………………………….....