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Modern Kitchens Ltd. sells imported fancy kitchenware to retailers. The balances of selected accounts as at August 31,2022 are shown below. The following transactions took
Modern Kitchens Ltd. sells imported fancy kitchenware to retailers. The balances of selected accounts as at August 31,2022 are shown below. The following transactions took place during September 2022: a) The company sold merchandise on account to various retailers for a total amount of $38,000, with credit terms 1.5/10,n/30. Some of these retailers purchased merchandise for a gross amount of $20,000, and paid the amount due within 10 days. In addition MKL collected $24,000 from its other customers during the month. b) Two of MKL's customers owed the company a combined amount of $2,500 and were in financial trouble during September due to increased competition. They were forced to close their businesses before the end of September. MKL does not expect to receive any money from these two customers and considered their accounts worthless. c) MKL estimates that 5% of its accounts receivable at September 30, 2022 will not be collected in the future. Required: 1. Prepare summary journal entries to record the transactions above, as well as any related adjusting entries at September 30,2022, which is the end of MKL's fiscal year. (9 marks) 2. Compute the amount of net sales that would be reported in MKL's statement of earnings for the year ended September 30, 2022. (2 marks)
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