Carefully consider the following information before answering the questions that follow:
Quarter Foods began its operations January 1, 2014. Quarter Foods sells non-local and nonorganic foods to individual consumers and local businesses. As its food does not go bad, Quarter Foods return policy is that anything can be returned for a full refund within one week. In 2014 all sales were completed before December 24, 2014.
Individual Customers:
All of its sales to individual customers are with traditional credit cards and these credit card companies charge Quarter Foods a 2% service fee for all sales (and refund this fee with any returns). In 2014, Quarter Foods sold $220,000 to individual consumers and $20,000 of these sales was returned within the one week period. An individual who spent $5,000 at Quarter Foods realized that Quarter Foods was non-organic and when she inquired about returns Quarter Foods offered her an allowance on the purchase in the form of a $1,500 store gift card, which she accepted instead of returning the items.
Business Customers:
All of Quarter Foods' sales to businesses are on account. Quarter Foods offers a discount of "5/20 n/60" for early payments of sales on account. In 2014, Quarter Foods sold $170,000 to business customers and $10,000 of these sales was returned within the one week period. Quarter Foods estimates that 5% of the final Sales on Account (those that the business customers do not return) will not be collected.
One business customer, with purchases in 2014 of $20,000, always paid Quarter Foods within 15 days of the purchase. Another business customer, with $5,000 of unpaid purchases, declared bankruptcy and did not have any means to pay any of the bill. No other business customer paid within 30 days of the purchase. At the end of the year Quarter Foods' balance in Accounts Receivable is $20,000. Both of these customers' purchases were included in the $170,000.
Quarter Foods appropriately accounted for all of its transactions and adjusting entries during 2014. Multi-Part Questions for Quarter Foods: (Be sure to read all of page 1 first.)
- What where Quarter Foods' Net Sales to individual customers for 2014? 4 points.
- How much net cash did it ultimately receive from Sales to individual customers in 2014?
- Write the entry that Quarter Foods made to record Bad Debt Expense in 2014:
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Journal Entry
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Debit
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Credit
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- What is the Net Realizable Value of Quarter Foods' Accounts Receivable as of the end of 2014?
- What was Quarter Foods' Total Net Sales for 2014?
- How much total cash from all customers did Quarter Foods ultimately receive in 2014?