The following data were selected from the records of Sykes Company for the year
ID: 2335790 • Letter: T
Question
The following data were selected from the records of Sykes Company for the year ended December 31, Current Year.
In the following order, except for cash sales, the company sold merchandise and made collections on credit terms 3/10, n/30 (assume a unit sales price of $700 in all transactions and use the gross method to record sales revenue).
Transactions during Current Year
Sold merchandise for cash, $248,000.
Sold merchandise to R. Smif; invoice price, $10,500.
Sold merchandise to K. Miller; invoice price, $37,000.
Two days after purchase date, R. Smif returned one of the units purchased in (b) and received account credit.
Sold merchandise to B. Sears; invoice price, $29,000.
R. Smif paid his account in full within the discount period.
Collected $89,000 cash from customer sales on credit in prior year, all within the discount periods.
Miller paid the invoice in (c) within the discount period.
Sold merchandise to R. Roy; invoice price, $25,500.
Three days after paying the account in full, K. Miller returned seven defective units and received a cash refund.
After the discount period, collected $5,000 cash on an account receivable on sales in a prior year.
Wrote off a prior year account of $4,000 after deciding that the amount would never be collected.
The estimated bad debt rate used by the company was 1.0 percent of credit sales net of returns.
Balances January 1, Current Year Accounts receivable (various customers) $ 125,000 Allowance for doubtful accounts 7,000 Required 1. Using the following categories, indicate the effect of each listed transaction, including the write-off of the uncollectible account and the adjusting entry for estimated bad debts (ignore cost of goods sold). The first transaction is used as an example. (Round your answers to the nearest whole dollar amount. Amounts to be deducted should be indicated by a minus sign.) Sales Sales Sales Revenue Bad Debt Expense Transaction Discounts Returns and taken Allowances $ 248,000 10,500 37,000 700 29,000 89,000 k. m. Total $ 324,500$89,000 700 $Explanation / Answer
Requirement 1 Transaction Sales Revenue Sales Discounts Sales Returns and allowances Bad-debt expense Explanation a. 248000 b. 10500 c. 37000 d. 700 One unit returned e. 29000 f. 294 =(10500-700)*3% g. 2753 =89000*3/97 h. 1110 =37000*3% i. 25500 j. -147 4900 =seven units returned on which discount has also to be reversed k. 155 =5000*3/97 l. The entry would not affect above four heads m. 1020 =(10500+37000+29000+25500)*1% Total 350000 4164 5600 1020 Requirement 2 Sykes Company Income Statement (Partial) For the year ended December 31, Current Year Sales Revenue 350000 Less : Sales Return & allowances 5600 Less : Sales Discounts 4164 Net Sales Revenue 340236 Operating Expenses Bad-debt expense 1020
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