Use the data presented in AP6-1, which were selected from the records of Sharkim Company for the year ended December 31, current year.

Data from in AP6-1

The following data were selected from the records of Sharkim Company for the year ended December 31, current year.

In the following order, except for cash sales, the company sold merchandise and made collections on credit terms 2/10, n/30 (assume a unit sales price of $500 in all transactions). Transactions during the current year
a. Sold merchandise for cash, $227,000.
b. Sold merchandise to Karen Corp.; invoice price, $12,000.
c. Sold merchandise to White Company; invoice price, $23,500.
d. Karen paid the invoice in (b) within the discount period.
e. Sold merchandise to Cavendish Inc.; invoice price, $26,000.
f. Two days after paying the account in full, Karen returned one defective unit and received a cash refund.
g. Collected $88,200 cash from customer sales on credit in prior year, all within the discount periods.
h. Three days after purchase date, White returned seven of the units purchased in (c) and received account credit.
i. White paid its account in full within the discount period.
j. Sold merchandise to Delta Corporation; invoice price, $18,500.
k. Cavendish (e) paid its account in full after the discount period.
l. Wrote off a prior year account of $2,400 after deciding that the amount would never be collected.
m. The estimated bad debt rate used by the company was 4 percent of credit sales net of returns.

Required:
1. Give the journal entries for these transactions, including the write-off of the uncollectible account and the adjusting entry for estimated bad debts. Do not record cost of goods sold. Show computations for each entry.
2. Show how the accounts related to the preceding sale and collection activities should be reported on the current year income statement.

Transcribed Image Text:

Balances January 1, current year: Accounts receivable (various customers) Allowance for doubtful accounts $116,000 5,200