ER 6 Reporting and Interpreting Sales Revenue, Receivables, and Cash connect PROBLEMS Repo The following current year rti ng Net Sales and Expenses with Discounts, Returns, and Bad Debts (AP6-1) ing data were selected from the records of Sykes Company for the year ended December 31, P6-1 LO6-1, 6-2 Balances January I, current year Accounts receivable (various customers) Allowance for doubtful accounts $120,000 8,000 In the following order, except for cash sales, the company sold merchandise and made collections on terms 2/10, n/30 (assume a unit sales price of $500 in all transactions and use the gross method to record sales revenue). Transactions during 2014 a. Sold merchandise for cash, $235,000 b. Sold merchandise to R. Smith; invoice price, $11,500. c. Sold merchandise to K. Miller; invoice price, $26.500 d. Two days after purchase date, R. Smith returned one of the units purchased in (b) and received account credit. e. Sold merchandise to B. Scars; invoice price, $24,000. . R. Smith paid his account in full within the discount period. d $98,000 cash from customer sales on credit in prior year, all within the discount periods . K. Miller paid the invoice in (c) within the discount period. i. Sold merchandise to R. Roy; invoice price, $19,000. J. Three days after paying the account in full, K. Miller returned seven defective units and received a cash refund. Wrote off a prior year account of $3,000 after deciding that the amount would never be collected. hm. The estimated bad debt rate used by the company was 1.5 percent of credit sales net of returns. . After the discount period, collected $6,000 cash on an account receivable on sales in a prior year. lowing categories, indicate the effect of each listed transaction, including the write ctible account and the adjusting entry for estimated bad debts (ignore cost of goods re L. Using the fol Indicate the sign and amount of the effect or use "NE" for "no effect." The first transaction is used as an example Sales Sales Discounts Sales Returns and Bad Debt Expense Allowances (taken) NE Revenue (a) +235,000 Show how the the 201ecounts related to the preceding sale and collection activities should be reported on P6-2 LO6-2 icome statement. (Treat sales discounts as a contra-revenue.) tecording Bad Debts and In roaster and marketer of branded fresh-roasted whole bean concerning the Allowance for Doubtful Accounts 62 dbs and Interpreting Disclosure of Allowance for Doubtful toftse Cofte & Tea,Inc., is a specialt informatic in information tior and Exchange Commission