Levine Company uses the perpetual inventory system and allows customers to use two credit cards in charging purchases. With the Suntrust Bank Card, Levine receives an immediate credit to its account when it deposits sales receipts. Suntrust assesses a 4% service charge for credit card sales. The sessssscond credit card that Levine accepts is the Continental Card. Levine sends its accumulated receipts to Continental on a weekly basis and is paid by Continental about a week later. Continental assesses a 2.5% charge on sales for using its card. Prepare journal entries to record the following selected credit card transactions of Levine Company.
Sold merchandise for $8,400 (that had cost $6,000) and accepted the customer's Suntrust Bank Card. The Suntrust receipts are immediately deposited in Levine's bank account.
Sold merchandise for $5,600 (that had cost $3,500) and accepted the customer's Continental Card. Transferred $5,600 of credit card receipts to Continental, requesting payment.
Received Continental's check for the April 12 billing, less the service charge.
Dexter Company applies the direct write-off method in accounting for uncollectible accounts. Prepare journal entries to record the following selected transactions of Dexter.
Dexter determines that it cannot collect $45,000 of its accounts receivable from its customer Lester Company.
Lester Company unexpectedly pays its account in full to Dexter Company. Dexter records its recovery of this bad debt.
At year-end (December 31), Chan Company estimates its bad debts as 0.5% of its annual credit sales of $975,000. Chan records its bad debts expense for that estimate. On the following February 1, Chan decides that the $580 account of P. Park is uncollectible and writes it off as a bad debt. On June 5, Park unexpectedly pays the amount previously written off. Prepare the journal entries of Chan to record these transactions and events of December 31, February 1, and June 5.
At each calendar year-end, Mazie Supply Co. uses the percent of accounts receivable method to estimate bad debts. On December 31, 2015, it has outstanding accounts receivable of $55,000, and it estimates that 2% will be uncollectible. Prepare the adjusting entry to record bad debts expense for year 2015 under the assumption that the Allowance for Doubtful Accounts has (a) a $415 credit balance before the adjustment and (b) a $291 debit balance before the adjustment.
Daley Company estimates uncollectible accounts using the allowance method at December 31. It prepared the following aging of receivables analysis.
Refer to the information in Exercise 9-10 and prepare the journal entries for the following selected transactions of Danica Company for 2015.
Received Lee's payment for principal and interest on the note dated December 13.
Accepted a $5,000, 10%, 90-day note dated March 3 in granting a time extension on the past-due account receivable of Tomas Company.
Accepted a $2,000, 30-day, 9% note dated March 17 in granting H. Cheng a time extension on his past-due account receivable.
Cheng dishonors his note when presented for payment.
Wrote off the Cheng account against the Allowance for Doubtful Accounts.
Received the Tomas payment for principal and interest on the note dated March 3.
Check Jan. 27, Dr. Cash $9,595
June 1, Dr. Cash $5,125
The following information is from the annual financial statements of Raheem Company. Compute its accounts receivable turnover for 2014 and 2015. Compare the two years' results and give a possible explanation for any change (competitors average a turnover of 11).