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The document describes an accounting entry made by an inexperienced accountant and provides the correcting entries. The entry on Dec 17 incorrectly granted a sales discount when the discount period had lapsed and should be corrected by debiting Sales Discounts and crediting Accounts Receivable. The entry on Dec 20 failed to recognize accrued interest of $280, which is corrected by debiting Interest Receivable and crediting Interest Revenue. The entry on Dec 27 incorrectly reduced the allowance for doubtful accounts for a collection and should eliminate the bad debt expense. The final entry on Dec 31 adjusts the bad debt expense to the proper amount of $6,000 based on 1% of net sales of $600,000.

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85 views2 pages

Solve 10

The document describes an accounting entry made by an inexperienced accountant and provides the correcting entries. The entry on Dec 17 incorrectly granted a sales discount when the discount period had lapsed and should be corrected by debiting Sales Discounts and crediting Accounts Receivable. The entry on Dec 20 failed to recognize accrued interest of $280, which is corrected by debiting Interest Receivable and crediting Interest Revenue. The entry on Dec 27 incorrectly reduced the allowance for doubtful accounts for a collection and should eliminate the bad debt expense. The final entry on Dec 31 adjusts the bad debt expense to the proper amount of $6,000 based on 1% of net sales of $600,000.

Uploaded by

lalalala
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Ex.

182
An inexperienced accountant made the following entries. In each case, the explanation to the
entry is correct.

Dec. 17 Cash........................................................................................
2,940
Sales Discounts....................................................................... 60
Accounts Receivable...................................................... 3,000 (To
record collection of 12/4 sales, terms 2/10, n/30)
20 Cash........................................................................................ 18,360
Notes Receivable .......................................................... 18,000
Interest Revenue ........................................................... 360
(Collection of $18,000, 8%, 90 day note dated Sept. 21.
Interest had been accrued through Nov. 30.)
27 Cash........................................................................................ 1,000
Bad Debts Expense........................................................ 1,000
(Collection of account previously written off as
uncollectible under allowance method)
31 Bad Debts Expense................................................................. 600
Allowance for Doubtful Accounts.................................... 600
(To recognize estimated bad debts based on 1% of
net sales of $600,000)
Instructions
Prepare the correcting entries.
Solution 182 (15 min.)
Dec. 17 Accounts Receivable............................................................ 60
Sales Discounts........................................................... 60
(To correct accounts for granting sales discount
when discount period had lapsed)
20 Interest Revenue.................................................................. 280
Interest Receivable...................................................... 280
[To recognize collection of interest accrued through
November 30 ($18,000 × 8% × 70/360 = $280)]
27 Bad Debts Expense.............................................................. 1,000
Allowance for Doubtful Accounts................................. 1,000
(To correct erroneous collection entry)
31 Bad Debts Expense.............................................................. 5,400
Allowance for Doubtful Accounts................................. 5,400
[To adjust balance in Bad Debts Expense to
$6,000 (1% × $600,000)]

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