P5-62A. Learning Objectives 1, 2, 3, 4, 5: Apply GAAP for proper revenue recognition; account for sales allowances; account for sales discounts; account for accounts receivable; write off account; estimate uncollectible account expense) Bowerston Variety Store had the following balances as of November 1 Accounts Receivable Allowance for Uncollectible Accounts $5,100 $360 The following selected transactions occurred at Bowerston Variety Store during the month of November: November 3 Sold $300 of merchandise to Martino's Inc., which paid for the items in cash. The items cost Bowerston $120. November Sold $600 of merchandise to Liberty Co, which paid by credit card. The credit card company charges Bowerston a fee of 2% on credit card sales. Bowerston's cost of this merchandise was $245. November 10 Sold $1,300 of merchandise to Willow Creek on account. Terms were 2/10, November Sold $2,000 of merchandise to Amherst Shoppes on account. Terms were 2/10, November 12 Sold $900 of merchandise to Black River Inc., on account. Terms were 2/10, November 18 Willow Creek reported that some of the merchandise received was in a different net 30. Bowerston's cost of this merchandise was $500. net 30. Bowerston's cost of this merchandise was $900. net 30. Bowerston's cost of this merchandise was $387 color than ordered so it returned $150 of the merchandise. The cost to Bowerston was $58 November 20 Amherst Shoppes paid the balance of what it owed for the purchase on November 22 Black River Inc., returned $200 of the merchandise for a refund. Bowerston's November 22 lack River Inc., paid the remaining balance owed for the purchase on November 23 Sold $5,000 of merchandise to Charleston Co. on account. Terms were 2/10, November 25 Willow Creek paid the balance of what it owed for the purchase on November 26 Discovered that Ena Enterprises, a customer owing $150 from a July November 11 cost of the returned merchandise was $86. November 12 net 30. Bowerston's cost of this merchandise was $2,000. November 10. transaction, declared bankruptcy and there is no chance of collection. Wrote off the balance of Erna's account. Sold $700 of merchandise to Denis's One-Stop-Shop on account. Terms were 2/10, net 30. Bowerston's cost of this merchandise was $245. Sales on account during the month of November for transactions not listed individually totaled $7,200. Cost of goods sold for these sales totaled $3,000. Credit card sales on account during the month of November for transactions not listed individually totaled $2,500. The credit card company charges Bowerston a fee of 2% on credit card sales. Cost of goods sold for these sales totaled $900. Cash collections on account during the month of November for transactions not listed individually totaled $4,500. (No discounts were taken by these customers.) Bowerston made the adjusting entries for the month to accrue for estimated future returns. Bowerston estimates that 5% of total sales will be returned. Bowerston assumes that cost of goods sold is 40% of sales. November 27 November1-30 November 1-30 November 1-30 November 30 November 30Bowerston made an adjusting entry to estimate uncollectible account expense for the month of November. Bowerston estimates its uncollectible-account expense as 1% of total credit (on account) sales for the month. Requirements 1. Record Bowerston's November transactions, including the cost of goods sold entries for each sale. 2. Calculate the net realizable value of accounts receivable as of November 30
