OBJ.6 EX 8-21 Entries for notes receivable The series of seven transactions reco

Question

OBJ.6 EX 8-21 Entries for notes receivable The series of seven transactions recorded in the following T accounts were related to a sale to a customer on account and the receipt of the amount owed. Briefly describe each transaction. CASH NOTES RECEIVABLE 61,509 60,000 (6) 60,000 ACCOUNTS RECEIVABLE SALES RETURNS AND ALLOWANCES 75,000 (3) 60,600 (5) 15,000 (3) 60,000 60,600 15,000 MERCHANDISE INVENTORY COST OF MERCHANDISE SOLD 9,000 (2) 45,000 (2) 45,000 (4) 9,000 SALES INTEREST REVENUE 75,000 600 909

Explanation / Answer

1) Sales on account of $75,000 2) cost of goods sold is $45,000 3) return of sales in transaction 1 above $15,000 4) cost of the sales(goods) returned is $9,000 5) note accepted in lieu of due amount of $60,000 6) Note dishonoured on due date of amount 60,600 ( out of which 600is interest accrued) 7) cash collected on note of $60,000 with interest of $1,509

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