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Trinity Corporation reported net accounts receivable on its September 30, 2007 balance sheet of $54,320 this amount is remaining of allowance for doubtful accounts of $3,810. Trinity Corporation has a September 30 year-end.

Total sales for year ended September 30, 2008 totalled $2,724,210 are given below:

Credit sales     1,224,410
Cash sales      1,499,800
Total sales     $2,724,210

Credit sales signify credit granted by Trinity Corporation. Credit terms are 2/10, net 60.

Trinity Corporation permits customers to replace items for nighty days from date of sale. For year ending September 30, 2008, customers replace items with sales price of $195,200 are given below:

Credit sales     123,400
Cash sales        73,000
Total returns    $196,400

Cash refund was given to cash customers, whereas credit customers were provided a credit to their account. Returns by credit customers were all ended earlier than payment was received.

For a year ending September 30, 2008, credit customers paid $1,036,600 in cash. Of this amount $184,000 was paid outside the discount period. Balance had allowed discount subtracted from amount still to pay (that is the amount of cash received is 98% of the amount owed).

For a year ending September 30, 2008, Trinity Corporation prepare off $24,660 of accounts receivable as uncollectible.

Sales returns and sales discounts are saved as contra-revenues.

problems:

1) Create summary journal entries associated to (1) sales returns, (2) sales, (3) collections of accounts receivable, and (4) prepare-offs of accounts receivable for year ended September 30, 2008.

2) Complete the ledger T account for asset accounts receivable, starting with account balance as at September 30, 2008. After all transactions have been placed compute the account balance as at September 30, 200.

3) Create a journal entry to verify bad debt expense for year ending September 30, 2008 given the aging of accounts receivable as at September 30, 2008 and amount expected to be uncollectible in all category:

Age category                            Amount      % uncollectible
Current accounts                       54500                0.02
1-3 months overdue                  16980                  0.1
4 months or more overdue          9000                  0.4
                                                  80480

4) Complete the ledger T account for contra asset allowance for doubtful accounts, starting with account balance as at September 30, 2007. After all transactions have been placed find out the account balance as at September 30, 2008.

Accounting Basics, Accounting

  • Category:- Accounting Basics
  • Reference No.:- M99713

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