1.
To record: The necessary transactions for Company DRS on each date.
1.
Answer to Problem 5.2BP
Journal entries for the Company DRS:
Date | Account Title and Explanation | Debit ($) | Credit ($) | |
June 16 |
| 2,700 | ||
Service revenue (2) | 2,700 | |||
(To record services provided on account) | ||||
June 20 | Sales allowance (3) | 810 | ||
Accounts receivable | 810 | |||
(To record sales allowance for services on account) | ||||
June 30 | Cash (4) | 1,890 | ||
Accounts receivable | 1,890 | |||
(To record receipt of cash on account) |
Table (1)
Explanation of Solution
On June 10:
No entry is required because Person R crashes the hard drive and sends to the Company DRS.
On June 12:
No entry is required because after initial evaluation Company DRS emails Person R to let him know that full data recovery will cost $3,000.
On June 13:
No entry is required because Person R informs to Company DRS that he would like them to recover the date and that he is a student at UCLA, qualifying him for 10% educational discount and reducing the cost by
On June 16:
- An increase in accounts receivable (asset account) is debited and,
- An increase in sales revenue (
stockholders’ equity account) is credited.
Working notes:
On June 19:
No entry is required because when Person R receives the hard drive he notices that Company DRS did not successfully recover all data. Where approximately 30% of the data has not been recovered and he informs to Company DRS.
On June 20:
- An increase in sales allowances (stockholders’ equity account) is debited and,
- A decrease in accounts receivable (asset account) is credited.
On June 30:
- An increase in cash (assets) it is debited and,
- A decrease in accounts receivable (asset account) is credited.
Determine the amount of cash received from Person R:.
2.
To show: Company DRS net revenues in its income statement
2.
Explanation of Solution
Company DRS | ||
Partial Income Statement | ||
Particulars | Amount($) | Amount ($) |
Total service revenues | $2,700.00 | |
Less: Sales allowances | (810) | |
Net service revenues | $1,890 |
Table (2)
Hence, Company DRS net service revenues are $1,890.
3.
To Calculate: Net revenues if Person R had paid his bill on June 25.
3.
Answer to Problem 5.2BP
June 25 | Cash | 1,852.2 | ||
Sales discounts (5) | 37.8 | |||
Accounts receivable (4) | 1,890 | |||
(To record receipt of cash on account) |
Table (3)
Explanation of Solution
On June 25:
Services rendered on June 20 and the payment is received on June 25. Here Person P make payment on its 5th day from the date of service received. Hence, Person P is eligible to get a sales discount of 2%. Thereby, Company DRS must have received its receivables after deducting the sales discount of 2%. This transaction increases cash, sales discount and decreases accounts receivable. Increase in cash (asset account) is debited, increase in sales discount (decrease in stockholders’ equity account) is debited, and a decrease in accounts receivable (asset account) is credited.
Working note for journal entry made on June 25:
Determine the amount of sales discount.
Particulars | Amount($) | Amount ($) |
Total service revenues | $2,700.00 | |
Less: Sales allowances | (810.00) | |
Sales discounts | (37.80) | |
Net service revenues | $1,852.20 |
Table (4)
Hence, Company DRS net service revenues are $1,852.20 if Person R pays his bill on June 25.
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Chapter 5 Solutions
FINANCIAL ACCOUNTING W/ACCESS >CI<
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