The following trial balance was prepared for Tile, Etc., Inc., on December 31, 2

Question

The following trial balance was prepared for Tile, Etc., Inc., on December 31, 2016, after the closing entries were posted Account Title Cash Accounts Receivable Allowance for Doubtful Accounts Inventory Accounts Payable Common Stock Retained Earnings Credit Debit $195,000 142,000 $ 26,500 459,000 112,000 535,000 122,500 Totals $796,000 $796,000 Tile, Etc. had the following transactions in 2017: 1. Purchased merchandise on account for $665,000 2. Sold merchandise that cost $505,000 for $1,060,000 on account. 3. Sold for $330,000 cash merchandise that had cost $194,000 4. Sold merchandise for $275,000 to credit card customers. The merchandise had cost $130,000. The credit card company charges a 3 percent fee 5. Collected $790,000 cash from accounts receivable 6. Paid $695,000 cash on accounts payable 7. Paid $162,000 cash for selling and administrative expenses 8. Collected cash for the full amount due from the credit card company (see item 4) 9. Loaned $67,000 to J. Parks. The note had an 6 percent interest rate and a one-year term to maturity 10. Wrote off $9,200 of accounts as uncollectible 11. Made the following adjusting entries (a) Recorded uncollectible accounts expense estimated at 1 percent of sales on account. (b) Recorded seven months of accrued interest on the note at December 31, 2017 (see item 9)

Explanation / Answer

Date Account's tittle Debit $ Credit $ 1 Inventory               665,000 Accounts Payable                  665,000 (Purchase of merchandise on account) 2 Accounts Receivable           1,060,000 Sales Revenue               1,060,000 (Sales on account ) Cost of Goods sold               505,000 Inventory                  505,000 3 Cash               330,000 Sales Revenue                  330,000 Cost of Goods sold               194,000 Inventory                  194,000 4 Accounts Receivable- Credit Card Custmer ( $ 275,000 x 97% )               266,750 Credit Card Charges ( $ 275,000 x 3% )                    8,250 Sales Revenue                  275,000 Cost of Goods sold               130,000 Inventory                  130,000 5 Cash               790,000 Accounts Receivable                  790,000 6 Accounts Payable               695,000 Cash                  695,000 7 Selling and Administrative Expenses               162,000 Cash                  162,000 8 Cash               266,750 Accounts Receivable- Credit Card Custmer                  266,750 9 6%-Notes Payable                 67,000 Cash                     67,000 10 Allowance for Doubtful Account                    9,200 Account Receivable                       9,200 11 Bad Debt Expenses ( $ 1,060,000 + $ 330,000 + $ 275,000 ) x 1%                 16,650 Allowance for Doubtful Account                     16,650 Accrued Interest Revenue ( $ 67,000 x 6% x 7/12 )                    2,345 Interest Revenue                       2,345

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