1. Sara Beauty Supply accepts Discover Cards from its customers. Discover charge
ID: 2448140 • Letter: 1
Question
1. Sara Beauty Supply accepts Discover Cards from its customers. Discover charges Sara 3.6% of sales for services. During the 2009-2010 fiscal year customers used Discover Cards to purchase $ 85,000 worth of merchandise. How much did Sara show as sales on its Income Statement for the year end of June 30, 2010 ? How much cash did Sara actually receive from these sales ?
2.Andrews Upholestry has determined that Global Builders accounts receivable balance of $ 5250 is uncollectible. Use the accounting equation to show how Andrews would write off the account using the following methods :
(a) The direct write - off method
(b) The allowance method for bad debts
3. On Feb. 15, 2011 , Will's Music renegotiated its overdue account balance of $1500 with New Wave Electronics by signing a four month promissary note at an interest rate of 12% .
(a) What is the pricipal amount of note ?
(b) What is the due date of note ?
(c) How much will Will's Music repay on the due date ?
Explanation / Answer
Solution:
Question 3
(a.) Principal Amount = $ 1,500
(b.) Due Date of note = Four month after 15th Feburary end on 14th June, 2011
(c.) Will will repay - Principal + Interest
Principal = $ 1,500
Interest = $ 1,500 * 12 % / 12 * 4
Interest = $ 60
Will will repay - 1,500 + 60
= $ 1,560
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