Cyndi Corporation reported net accounts receivable on its September 30, 2008 balance sheet of $54,320 (this amount is net of the allowance for doubtful accounts of $3,810). Cyndi Corporation has a September 30 year-end.
Gross sales for the year ended September 30, 2009 totaled $2,724,210 as follows:
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Credit sales
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1,224,410
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Cash sales
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1,499,800
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Total sales
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$2,724,210
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Credit sales represent credit granted by Cyndi Corporation. Credit terms are 2/10, net 60.
Cyndi Corporation allows customers to return items for 90 days from the date of sale. For the year ending September 30, 2009, customers returned items with a sales price of $195,200 as follows:
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Credit sales
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123,400
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Cash sales
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73,000
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Total returns
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$196,400
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Cash customers were given a cash refund, while credit customers were given a credit to their account. The returns by the credit customers were all made before payment was received.
For the year ending September 30, 2009, credit customers paid $1,036,600 in cash. Of this amount $184,000 was paid outside the discount period. The balance had the allowed discount deducted from the amount owed (i.e. the amount of cash received is 98% of the amount owed).
For the year ending September 30, 2009, Cyndi Corporation wrote off $24,660 of accounts receivable as uncollectible.
Sales returns and sales discounts are recorded as contra-revenues.
Required:
a.Prepare summary journal entries related to the (1) sales, (2) sales returns, (3) collections of accounts receivable, and (4) write-offs of accounts receivable for the year ended September 30, 2009.
b.Complete the following ledger T account for the asset accounts receivable, starting with the account balance as at September 30, 2008. After all transactions have been entered compute the account balance as at September 30, 2009. (Hint: the balance should be the number reported in g. below)
c.Prepare the journal entry to record bad debt expense for the year ending September 30, 2009 given the aging of accounts receivable as at September 30, 2009 and the amount expected to be uncollectible in each category:
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Age category
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Amount
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% uncollectible
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Current accounts
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54500
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0.02
|
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1-3 months overdue
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16980
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0.1
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4 months or more overdue
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9000
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0.4
|
|
|
80480
|
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d.Complete the following ledger T account for the contra asset allowance for doubtful accounts, starting with the account balance as at September 30, 2008. After all transactions have been entered compute the account balance as at September 30, 2009.