Problem #3: Accounts receivable A. Margrave sells inventory to clients by credit, providing terms 3/15, n/60 on all sales. Margrave made credit sales of $680,000 (gross price of inventory). Consider the following two scenarios: i. ii. The company collected $452,667 of cash and recorded $14,000 of sales discounts from accounts it collected on within 15 days. The company also collected $213,333 of cash from accounts collected beyond the 15-day discount. The company collected $480,000 of cash from accounts within 15 days. The company also collected $194,000 of cash and recorded $6,000 of sales discounts forfeited from accounts collected beyond the 15-day discount. 1. Provide journal entries under each scenario to record the collections of cash. It is easiest to provide two entries for each scenario. 2. Does one system report more net income? Does one system report more gross profit? Explain why. (This question will make you think carefully. It is worth 3 points in addition to your 15 if you can answer and explain your ar answer). B. Astrid Inc. had the following balances in its ledger of accounts at the beginning of the year 2021: Beginning of the year balances Accounts receivable Allowance for uncollectible accounts Allowance for sales returns $380,000 $36,500 $18,000 Astrid uses the Gross method for recording cash discounts on credit sales collections. During the year, it made credit sales of $3,100,000. It collected $3,200,000 cash from outstanding customer accounts and recorded $63,000 of sales discounts from customers who paid within the discount window. The company also recorded $19,100 of sales returns from customers returning products and wrote off $43,000 of accounts that were judged to be in default. Astrid Inc. assesses its sales returns at 1% of credit sales and uses the following aging schedule to determine its estimate of accounts that are in likelihood of default: Probability of default 7% 15% Days outstanding 1-30 30+ Dollar amount of accounts 111,500 43,400 1. What is the final account balance of Accounts Receivable? 2. What is the final account balance of the Allowance for Doubtful Accounts? 3. What is the final account balance of the Allowance for Sales Returns? 4. What is net credit sales for the period? 5. What is the book value of accounts receivable that is reported on the balance sheet?

Problem #3: Accounts receivable A. Margrave sells inventory to clients by credit, providing terms 3/15, n/60 on all sales. Margrave made credit sales of $680,000 (gross price of inventory). Consider the following two scenarios: i. The company collected $452,667 of cash and recorded $14,000 of sales discounts from accounts it collected on within 15 days. The company also collected $213,333 of cash from accounts collected beyond the 15-day discount. The company collected $480,000 of cash from accounts within 15 days. The company also collected $194,000 of cash and recorded $6,000 of sales discounts forfeited from accounts collected beyond the 15-day discount. 1. Provide journal entries under each scenario to record the collections of cash. It is easiest to provide two entries for each scenario. 2. Does one system report more net income? Does one system report more gross profit? Explain why. (This question will make you think carefully. It is worth 3 points in addition to your 15 if you can answer and explain your answer). B. Astrid Inc. had the following balances in its ledger of accounts at the beginning of the year 2021: Beginning of the year balances Allowance for uncollectible accounts Accounts receivable Allowance for sales returns $380,000 $36,500 $18,000 Astrid uses the Gross method for recording cash discounts on credit sales collections. During the year, it made credit sales of $3,100,000. It collected $3,200,000 cash from outstanding customer accounts and recorded $63,000 of sales discounts from customers who paid within the discount window. The company also recorded $19,100 of sales returns from customers returning products and wrote off $43,000 of accounts that were judged to be in default. Astrid Inc. assesses its sales returns at 1% of credit sales and uses the following aging schedule to determine its estimate of accounts that are in likelihood of default: Days outstanding 1-30 30+ Dollar amount of accounts 111,500 43,400 Probability of default 7% 15% 1. What is the final account balance of Accounts Receivable? 2. What is the final account balance of the Allowance for Doubtful Accounts? 3. What is the final account balance of the Allowance for Sales Returns? 4. What is net credit sales for the period? 5. What is the book value of accounts receivable that is reported on the balance sheet?