Please record the following journal entries 1. On December 2, a customer signs a
ID: 2339226 • Letter: P
Question
Please record the following journal entries
1. On December 2, a customer signs a contract to buy an equipment and service plan bundle with cash. The equipment normally sells for $280 and is bundled with an 18-month service plan, which usually sells for $50 per month. The price for the bundle is $1030 and the cost of the equipment to Smart Touch is $150. Smart Touch uses the perpetual inventory method and a relative sales value basis approach to allocate revenue between the equiment and the service plan. Round intermediary values to one decimal place and round final values to the nearest whole dollar.
2. On December 7, Smart Touch delivers equipment to a small retailer on consignment. The cost of the equipment was $1,590 and the combined retail selling price is $2,000. If the retail shop sells the equipment, Smart Touch will pay 20% commission. Both companies use a perpetual inventory method.
3. On December 10, Smart Touch receives notification that APA Corp. from the November 21st transaction has gone out of business. Smart Touch estimates $4,500 allowance for uncollectible accounts and the bad debt expense, assuming that the company will not pay their balance owed.
4. On December 10, paid for inventory purchased on December 1.
5. On December 28, received notification that the consignee sold the inventory that was delivered on December 7.
6. On December 31, determined that APA will not be paying their outstanding balance. Wrote off the total amount of bad debt from APA Corp.
7. Issued a bond on December 31 with a face value of $51,000 at a stated annual interest rate of 5% and a market annual interest rate of 7%. The bonds mature in 10 years and interest is paid annually at the end of the period. Round all balances to the nearest whole dollar.
Explanation / Answer
Answer to Q1.
Journal entry: Dec-2nd
Cash A/c $1180
To Sales A/c $1180
Answer to Q2. Dec 7th.
Accounts Receivable a/c $ 2000
To Sales Revenue a/c $ 2000
Cost of goods sold (equipment) a/c $ 1590
Merchandise Inventory a/c $ 1590
Answer to Q3. Dec 10th
Bad debts a/c $ 4500
To Allowance for uncollectible/bad debt expense a/c $ 4500
Answer to Q4. Dec 1st - Here missing information about Inventory Purchased, if something was purchased on 1st Dec on account, the below journal entry applicable when cash paid
Accounts payable/Supplier a/c $ xxx
To Cash/Bank a/c $ xxx
Answer to Q5. Dec 28th.
Cash a/c $ 1600
Commission a/c $ 400
To Accounts Receivable a/c $ 2000
Answer to Q6. Dec 31st
Allowance for uncollectible/bad debt expense a/c $ 4500
To Accounts Receibable a/c $ 4500
Answer to Q7. Dec 31st.
Cash a/c $ 51000
To Bonds Payable $ 51000
To record bonds issued at face value
31st Dec Bond Interest Expense ($51,000 x 5% / 12 months) $ 2550
Cash $ 2550
To record annual interest payment
After 10 years, the maturity date, the entry would be
Bond Interest Expense ($51,000 x 5% / 12 months) $ 2550
Bonds Payable $ 51000
To Cash $ 53550
To record final annual interest and bond repayment
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