(Learning Objectives 1, 2, 3, 4, 5: Apply GAAP for proper revenue recognition;account for sales allowances; account for sales discounts; account for accounts receivable;write off account; estimate uncollectible account expense)Bowerston Variety Store had the following balances as of November 1:Accounts Receivable $5,100Allowance for Uncollectible Accounts $360The following selected transactions occurred at Bowerston Variety Store during the month ofNovember:November 3 Sold $300 of merchandise to Martino’s Inc., which paid for the items in cash.The items cost Bowerston $120.Sold $600 of merchandise to Liberty Co., which paid by credit card. The creditcard company charges Bowerston a fee of 2% on credit card sales. Bowerston’scost of this merchandise was $245.November 5Sold $900 of merchandise to Black River Inc., on account. Terms were 2/10,net 30. Bowerston’s cost of this merchandise was $387.November 12November 18 Willow Creek reported that some of the merchandise received was in a dierentcolor than ordered so it returned $150 of the merchandise. The cost toBowerston was $58.November 20 Amherst Shoppes paid the balance of what it owed for the purchase onNovember 11.November 22 Black River Inc., returned $200 of the merchandise for a refund. Bowerston’scost of the returned merchandise was $86.November 22 Black River Inc., paid the remaining balance owed for the purchase onNovember 12.November 23 Sold $5,000 of merchandise to Charleston Co. on account. Terms were 2/10,net 30. Bowerston’s cost of this merchandise was $2,000.November 25 Willow Creek paid the balance of what it owed for the purchase onNovember 10.November 26 Discovered that Etna Enterprises, a customer owing $150 from a Julytransaction, declared bankruptcy and there is no chance of collection. Wroteo the balance of Etna’s account.November 1–30 Sales on account during the month of November for transactions not listedindividually totaled $7,200. Cost of goods sold for these sales totaled $3,000.November 1–30 Credit card sales on account during the month of November for transactionsnot listed individually totaled $2,500. The credit card company chargesBowerston a fee of 2% on credit card sales. Cost of goods sold for these salestotaled $900.November 1–30 Cash collections on account during the month of November for transactions notlisted individually totaled $4,500. (No discounts were taken by these customers.)November 30 Bowerston made the adjusting entries for the month to accrue for estimated futurereturns. Bowerston estimates that 5% of total sales will be returned. Bowerstonassumes that cost of goods sold is 40% of sales.November 27 Sold $700 of merchandise to Denis’s One-Stop-Shop on account. Termswere 2/10, net 30. Bowerston’s cost of this merchandise was $245.November 30 Bowerston made an adjusting entry to estimate uncollectible account expense forthe month of November. Bowerston estimates its uncollectible-account expenseas 1% of total credit (on account) sales for the month.November 10 Sold $1,300 of merchandise to Willow Creek on account. Terms were 2/10,net 30. Bowerston’s cost of this merchandise was $500.November 11 Sold $2,000 of merchandise to Amherst Shoppes on account. Terms were 2/10,net 30. Bowerston’s cost of this merchandise was $900.Requirements1. Record Bowerston’s November transactions, including the cost of goods sold entries foreach sale.2. Calculate the net realizable value of accounts receivable as of November 30.
The Effect Of Prepaid Taxes On Assets And Liabilities
Many businesses estimate tax liability and make payments throughout the year (often quarterly). When a company overestimates its tax liability, this results in the business paying a prepaid tax. Prepaid taxes will be reversed within one year but can result in prepaid assets and liabilities.
Final Accounts
Financial accounting is one of the branches of accounting in which the transactions arising in the business over a particular period are recorded.
Ledger Posting
A ledger is an account that provides information on all the transactions that have taken place during a particular period. It is also known as General Ledger. For example, your bank account statement is a general ledger that gives information about the amount paid/debited or received/ credited from your bank account over some time.
Trial Balance and Final Accounts
In accounting we start with recording transaction with journal entries then we make separate ledger account for each type of transaction. It is very necessary to check and verify that the transaction transferred to ledgers from the journal are accurately recorded or not. Trial balance helps in this. Trial balance helps to check the accuracy of posting the ledger accounts. It helps the accountant to assist in preparing final accounts. It also helps the accountant to check whether all the debits and credits of items are recorded and posted accurately. Like in a balance sheet debit and credit side should be equal, similarly in trial balance debit balance and credit balance should tally.
Adjustment Entries
At the end of every accounting period Adjustment Entries are made in order to adjust the accounts precisely replicate the expenses and revenue of the current period. It is also known as end of period adjustment. It can also be referred as financial reporting that corrects the errors made previously in the accounting period. The basic characteristics of every adjustment entry is that it affects at least one real account and one nominal account.
(Learning Objectives 1, 2, 3, 4, 5: Apply GAAP for proper revenue recognition;
account for sales allowances; account for sales discounts; account for
write off account; estimate uncollectible account expense)
Bowerston Variety Store had the following balances as of November 1:
Accounts Receivable $5,100
Allowance for Uncollectible Accounts $360
The following selected transactions occurred at Bowerston Variety Store during the month of
November:
November 3 Sold $300 of merchandise to Martino’s Inc., which paid for the items in cash.
The items cost Bowerston $120.
Sold $600 of merchandise to Liberty Co., which paid by credit card. The credit
card company charges Bowerston a fee of 2% on credit card sales. Bowerston’s
cost of this merchandise was $245.
November 5
Sold $900 of merchandise to Black River Inc., on account. Terms were 2/10,
net 30. Bowerston’s cost of this merchandise was $387.
November 12
November 18 Willow Creek reported that some of the merchandise received was in a dierent
color than ordered so it returned $150 of the merchandise. The cost to
Bowerston was $58.
November 20 Amherst Shoppes paid the balance of what it owed for the purchase on
November 11.
November 22 Black River Inc., returned $200 of the merchandise for a refund. Bowerston’s
cost of the returned merchandise was $86.
November 22 Black River Inc., paid the remaining balance owed for the purchase on
November 12.
November 23 Sold $5,000 of merchandise to Charleston Co. on account. Terms were 2/10,
net 30. Bowerston’s cost of this merchandise was $2,000.
November 25 Willow Creek paid the balance of what it owed for the purchase on
November 10.
November 26 Discovered that Etna Enterprises, a customer owing $150 from a July
transaction, declared bankruptcy and there is no chance of collection. Wrote
o the balance of Etna’s account.
November 1–30 Sales on account during the month of November for transactions not listed
individually totaled $7,200. Cost of goods sold for these sales totaled $3,000.
November 1–30 Credit card sales on account during the month of November for transactions
not listed individually totaled $2,500. The credit card company charges
Bowerston a fee of 2% on credit card sales. Cost of goods sold for these sales
totaled $900.
November 1–30 Cash collections on account during the month of November for transactions not
listed individually totaled $4,500. (No discounts were taken by these customers.)
November 30 Bowerston made the
returns. Bowerston estimates that 5% of total sales will be returned. Bowerston
assumes that cost of goods sold is 40% of sales.
November 27 Sold $700 of merchandise to Denis’s One-Stop-Shop on account. Terms
were 2/10, net 30. Bowerston’s cost of this merchandise was $245.
November 30 Bowerston made an adjusting entry to estimate uncollectible account expense for
the month of November. Bowerston estimates its uncollectible-account expense
as 1% of total credit (on account) sales for the month.
November 10 Sold $1,300 of merchandise to Willow Creek on account. Terms were 2/10,
net 30. Bowerston’s cost of this merchandise was $500.
November 11 Sold $2,000 of merchandise to Amherst Shoppes on account. Terms were 2/10,
net 30. Bowerston’s cost of this merchandise was $900.
Requirements
1. Record Bowerston’s November transactions, including the cost of goods sold entries for
each sale.
2. Calculate the net realizable value of accounts receivable as of November 30.
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