Week 6 Worksheet - Solution (1)

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School
ITT Technical Institute Richardson campus **We aren't endorsed by this school
Course
ACCT 3301
Subject
Accounting
Date
Oct 17, 2023
Pages
3
Uploaded by BaronFieldCat9 on coursehero.com
Professor June Huang Fall 2023 - ACCT 2301 (Sections 006 and 012) In-class Worksheet: Week 6 Rugs by Mochi Rugs by Mochi is a wholesale rug company that sells rugs to furniture retailers (e.g., Ikea, Wayfair, or Target). 1. On April 4, Customer A bought $5,000 worth of rugs on account, costing Rugs by Mochi $3,600. Record the journal entries for the sale. Dr. Accounts Receivable (+A) 5,000 Cr. Revenue, Gross (+R, +SE) 5,000 Dr. COGS (+E, -SE) 3,600 Cr. Inventory (-A) 3,600 Rugs by Mochi offers Customer A a sales discount with terms 4/10, n/30. On April 12, Customer A paid for the order. Record the journal entries for the payment. Dr. Cash (+A) 4,800 Dr. Sales Discount (+XR, -R, -SE) 200 Cr. Accounts Receivable (-A) 5,000 How much does the customer pay? The sales discount 4/10, n/30 means that if the customer pays within 10 days, they get 4% off; otherwise, they owe the full amount within 30 days. Because the customer pays within 10 days, they get a discount of 4% * $5,000 = $200 and pay $5,000 - $200 = $4,800 Thus we debit cash $4,800 and put the $200 into Sales Discount, a contra-revenue account. The earlier Accounts Receivable amount gets reversed 2. On April 15, Customer B bought $2,000 worth of rugs on account, costing Rugs by Mochi $1,440. The customer has a right to return the order within 45 days. Record the journal entries for the sale. Dr. Accounts Receivable (+A) 2,000 Cr. Revenue, Gross (+R, +SE) 2,000 Dr. COGS (+E, -SE) 1,440 Cr. Inventory (-A) 1,440 1
On April 30, Customer B returns the order because they didn't like the rugs. Record the journal entries to account for the return. Dr. Sales Returns (+XR, -R, -SE) 2,000 Cr. Accounts Receivable (-A) 2,000 Dr. Inventory (+A) 1,440 Cr. COGS (-E, +SE) 1,440 3. How much would Rugs by Mochi recognize in Revenue, Net during the month of April? Revenue, Net = Revenue, Gross - Sales Discounts - Sales Returns - Sales Allowances = (5,000 + 2,000) - 200 - 2,000 - 0 = 4,800 4. At the end of December 2021, Rugs by Mochi had an ending balance of $15,000 for Allowance for Doubtful Accounts. During 2022, the company wrote off $10,000 in receivables. On December 31, 2022, the company had the following aging of receivables: Age of Accounts Receivables Balance Estimated % Uncollectible Estimated $ Uncollectible 0-30 days $100,000 0.8% $800 31-60 days 40,000 4.0% 1,600 Over 60 days 12,000 80.5% 9,660 Total $152,000 $12,060 (a) How much is the total estimated amount uncollectible at the end of 2022? See Table. The total amount is $12,060. (b) Fill in the Allowance for Doubtful Accounts T-account for 2022. How much would Rugs by Mochi recognize in bad debt expense for 2022? Record the journal entry as well. Allowance for Doubtful Accounts (xA, A) 15,000 BB Write-offs: 10,000 7,060 Bad debt expense 12,060 EB Ending Balance = Beginning Balance + Bad Debt Expense - Write-offs Bad Debt Expense = Ending Balance - Beginning Balance + Write-offs = 12,060 - 15,000 + 10,000 = 7,060 2
Dr. Bad Debt Expense (+E, -SE) 7,060 Cr. Allowance for Doubtful Accounts (+XA, -A) 7,060 (c) How much is Accounts Receivable, Net on December 31, 2022? AR, Net = AR, Gross - Allowance for Doubtful Accounts = $152,000 - $12,060 = $139,940 5. On January 20, 2023, Rugs by Mochi determines that $1,000 owed by Customer B is uncollectible. Record the journal entry to recognize this write-off. Dr. Allowance for Doubtful Accounts (-XA, +A) 1,000 Cr. Accounts Receivable, Gross (-A) 1,000 On March 15, 2023, Customer B surprisingly pays the $1,000 that had been written off on January 20. Record the journal entry to recognize this payment. Dr. Cash (+A) 1,000 Cr. Allowance for Doubtful Accounts (+XA, -A) 1,000 3
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