Question
Question 1. Roadrunner Enterprises manufactures special paint to foil coyotes in pursuit, and they sell all their paint on credit. At the end of 2021,
Question 1.
Roadrunner Enterprises manufactures special paint to foil coyotes in pursuit, and they sell all their paint on credit.
At the end of 2021, the company reported $400,000 in accounts receivable. Knowing that not everyone pays their debt, the company also allowed for $40,000 of uncollectable payments owed.
The company has an easy return policy, allowing for unopened paint containers to be returned at full value with free return shipping; return shipping typically costs 5% of the original sale. Paint returned can be resold.
At the end of 2021, Roadrunner sold some used office furniture to a start-up, allowing the buyer to pay for the furniture in 2024. Roadrunner sold the furniture at the market value of $75,000, agreeing to finance the sale with three-year note at 10% annual interest. Payments on both the principle and interest are due at the end of 2024.
Sadly, paint worth $10,000 sold on credit and shipped on December 31, 2021 was spilled on the highway when it fell off the Roadrunner delivery truck, and none of the paint could be salvaged.
In January 2022, several customers took advantage of Roadrunners return policy, and they returned paint valued at $10,000.
In 2022, collections on the 2021 accounts receivable totaled only $300,000, so Roadrunner sold the remaining 2021 bad debt to the Loonie Tunes collection agency at a 50% discount.
Required:
Show the balance sheet entry for 2021 accounts receivable.
Show Roadrunners journal entries from 2021 to December 2024 for the office furniture sale.
Show the Roadrunner journal entries for 2021 and 2022 related to the $400,000 in sales accrued to 2021 accounts receivable.
Show the balance sheet entries relative to all transactions for 2021 and 2022.
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