Exercise 7-26

Computing the Accounts Receivable Balance The following information from Tiny Companys first year of operations is to be used in testing the accuracy of Accounts Receivable. The December 31, 2015, balance is $28,300.

(a) Collections from customers, $48,000

(b) Merchandise purchased, $74,000

(c) Ending merchandise inventory, $31,500

(d) Goods sell at 60% above cost

(e) All sales on account Compute the balance that Accounts Receivable should show and determine the amount of any shortage or overage.

Exercise 7-27

Sales Discounts

On November 1, Rosario Company sold goods on account for $7,000. The terms of the sale were 3/10, n/40, allowing sales discounts to be taken against partial payments. Payment in satisfaction of $3,000 of this amount was received on November 9. Payment in satisfaction of the remaining $4,000 was received on December 9.

• 1. How much cash did Rosario Company collect from this $7,000 account?
• 2. Using the gross method, what journal entries would Rosario make on November 9 and December 9?
• 3. Using the net method, what journal entries would Rosario make on November 9 and December 9?