Question
Mellisa Corp . had the following events during its final three months of the fiscal year ending on May 31, 2015. (a) March 28: Sold
Mellisa Corp. had the following events during its final three months of the fiscal year ending on May 31, 2015.
(a) March 28: Sold $1,600 of merchandise to Matthew Inc. on account.
(b) March 29: Matthew Inc. returned $300 of the merchandise purchased on March 28.
(c) April 3: Sold $ 4,800 of merchandise to Kenzi Inc.
(d) April 6: Matthew Inc. paid off all his purchase (including those made in the past).
(e) April 14: Wrote-off an old account for $ 3,000 which is related to sales made prior to March 1, 2015.
(f) April 25: Molly Ltd. purchased $12,000 of merchandise, paid half in cash
(g) May 30: Mellisa Corp. recovered $ 1,000 from the receivables that were written off on April 14.
Additional information:
- Credit terms: 2/10, n/30
- Matthew Inc. has a balance of $1,000 outstanding as of March 1, 2015, from purchases made on January 10, 2015.
- Mellisa Corp. records show the following account balances as of March 1, 2015:
Accounts Receivables $ 17,000
Allowance for Doubtful Accounts (credit balance). 1,000
Net Credit Sales.... 191,000
Cash Sales . 100,000
Required:
1. Prepare the journal entries to record the above transactions.
2. Mellisa Corp. uses the Aging of Accounts Receivables method to determine the amount of receivables that may not be collected in the future according to the following schedule:
Estimated Uncollectible Rate
Not yet Due. 5%
1-30 days past due.. 10%
31-60 days past due 15%
More than 60 days overdue 20%
Determine the amount of receivables that may not be collected in the future, and prepare the journal entry to record the bad debt expenses on May 31, 2015. Show all your calculations.
3. Suppose Thompson uses the Percentage of Credit Sales method to estimate bad debts, using a bad debt rate of 1%. Would Mellisa Corp. incur a higher or lower bad debt expense for the fiscal year ending on May 31, 2015? Show your calculations.
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