Question

2a. . Depot Company on June 1, 2017 sold to Recipient Company 100 bags of cement for $20 per bag on 2/10/net 30 terms. On June 3 Recipient returned 10 bags to Depot because the cement was not need in Recipient’s construction project. Recipient paid the total amount owing for the cement transaction on June 8. Deport records its sales at their gross value at time of initial sale. What entries should Depot make on June 1, June 3 and June 8 for the cement transactions?

2b. At December 31, 2017 Depot had a credit balance of $200 in its allowance for uncollectible account (allowance for bad debts). Depot using an aging of accounts receivable determined that the allowance in the allowance account at the end of 2017 should be $700. What entry should Depot make to adjust the balance in allowance account at year end? If, instead, Depot used the percentage of sales approach what would the entry be if total credit sales for the year amounted to $70,000 and the rate of loss on credit sales have historically been 1 percent?

Answer 1