5 A) Terps Co. has $200,000 of accounts Receivable as of January 1, 2015. During

Question

5 A) Terps Co. has $200,000 of accounts Receivable as of January 1, 2015. During 2015, credit sales amounted to $500,000; cash collections of credit sales were $450,000 and sales returns were $20,000. The unadjusted credit balance of the allowance for bad debts account is $10,000 at December 31. Management estimates that six and a half percent of net credit sales are uncollectible. How much bad debt expense should the company report on the income statement?

B) Austin Powers Co. has a Mini Cooper able to travel on land, in the air or underwater that cost the British Ministry of Defense $160,000 to build. The Mini Cooper was placed into service on Jan 1, 20xx. The vehicle has a $20,000 salvage value and should last 150,000 miles or 4 years. Set up depreciation schedule using the straight-line method. Determine the gain or loss on the sale of the Mini Cooper assuming it is sold at the end of year 3 for $62,000.

Anyone? Please show all work :)

Explanation / Answer

5 A. Bad debt expense:

bad debt expense to be reported on income statement = 31200

5 B.

Depreciation schedule:

Gain or loss on sale:

Gain on sale= 14500

a Credit sales, gross            5,00,000 Less: sales returns                20,000 Credit sales, net            4,80,000 b Percentage allowance 6.5% c=a*b Bad debt expense                31,200

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