Question

On the Go Warehouse distributes suitcases to retail stores and extends credit terms of 1/10, n/30 to all of its customers. The following selected transactions occurred.

Requirement 1: Please prepare journal entries for each of the following transactions for On the Go Warehouse. Use the general journal on the next page.

Dec 1.. Sold 40 suitcases on account to Luggage World for $65 each, the cost of each suitcase was $40.

Dec 3.. Purchased 85 suitcases on account for $30 each from Trunk Manufacturing, terms 1/15, n/30.

Dec 7.. Luggage World returned 7 of the suitcases sold on Dec 1. This luggage was not defective; Luggage World purchased 7 more than needed.

Dec 8.. Received final payment from Luggage World from the Dec 1 sale.

Dec 10 Wrote-off the account receivable of Packem-up, Inc., $280, who notified On the Go Warehouse that it would be unable to pay the amount due.

Dec 15 Received a request from Samson Company for an extension of time for the account receivable ($3,700) that was due on Dec 15. Their request was granted and they signed a 60-day, 11% note.

Dec 20 Paid Trunk Manufacturing the amount owed.

Dec 25 Surprisingly, received a check from Packem-up, Inc., for payment in full of the amount owed that was written off on Dec 10, $280.

Dec 31 Estimated bad debts, based on an aging of accounts receivable. The allowance for uncollectible accounts has a $300 debit balance prior to any adjustments. The aging schedule is shown below:

	Age of Accounts
Total Balance	1-30 Days	31-60 Days	61-90 Days	Over 90 Days
$100,000	$60,000	$16,000	$14,000	$10,000
Estimated % uncollectible	1%	2%	5%	16%

Dec 31 Accrued interest on the Dec 15 note receivable.

Feb 15 (next year) Received payment, in full, on the amount owed from Samson Company on Dec 15.

Answer 1

Solution

Date	General journal	Debit $	credit $
December 1	Account receivable	$2,600
	Sales revenue (40*$65)		$2,600
	Cost of goods sold out	$1,600
	Merchandise inventory (40*$40)		$1,600
December 3	inventory	$2,550
	Account payable (85*$30)		$2,550
December 7	sales return and allowances	$455
	Account receivable(7*$65)		$455
Dec 8	cash	$2123.55
	Sales discount(2145*1%)	$21.45
	Account receivable(2600-455)		$2145
December 10	allowance for doubtful Account	$280
	Account receivable		$280
December 15	Notes receivable	$3,700
	Account receivable		$3,700
December 20	Account payable	$2550
	Cash		$2524.50
	Sales discount		$25.50
December 25	Account receivable	$280
	Allowance for doubtful debt		$280
December 25	cash	$280
	Account receivable		$280
December 31	bad debt Expenses	$3220
	Allowance for doubtful debt ( note)		$3220
Dec 31	interest receivable
	Interest Revenue
Feb 15	Cash	$3767
	Interest receivable		$49
	Interest Revenue		$18
	Note receivable		$3700

Note - Calculations of allowance for uncollectible

$60,000*1% =$600

Add $16,000*2% =$320

Add $14,000*5% =$700

Add $10,000*16% =$1,600

Total. =$3220

Calculations of interest revenue

=(3700*11%*16)/100*365

=$18

Calculations of interest receivable

=(3700*11%*44)/100*365

=$49