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Task 1 Reporting Net Sales with Credit Sales, Sales Discounts, Sales Returns, and Credit Card Sales E6-3 L02 The following transactions were selected from among
Task 1 Reporting Net Sales with Credit Sales, Sales Discounts, Sales Returns, and Credit Card Sales E6-3 L02 The following transactions were selected from among those completed by Cadence Retailers in 2011: Nov. 20 Sold 20 items of merchandise to Customer B at an invoice price of $5,500 (total; terms 3/10, n/30 Sold two items of merchandise to Customer C, who charged the $400 sales price on her Visa credit card. Visa charges Cadence Retailersa 2 percent credit card fee Sold 10 identical items of merchandise to Customer D at an invoice price of $9,000 total; terms 3/10,n/30. 25 28 Customer D returned one of the items purchased on the 28th; the item was defective, and credit was given to the customer. Customer D paid the account balance in full. Customer B paid in full for the invoice of November 20,2011 29 Dec. 6 20 Task 2 Recording and Reporting a Bad Debt Estimate Using Aging Analysis Frederick Company uses the aging approach to estimate bad debt expense. The balance of each account receivable is aged on the basis of three time periods as follows: (1) not yet due, $275,000, (2) up to 120 days past due, S50,000, and (3) more than 120 days past due, $20,000. Experience has shown that for each age group. the average loss rate on the amount of the receivables at year-end due to uncollect- ability is (1) 3.5 percent, (2) 10 percent, and (3) 30 percent, respectively. At December 31, 2012 (end of the current year), the Allowance for Doubtful Accounts balance is $400 (credit) before the end-of-period adjusting entry is made. Required: 1. Prepare the appropriate bad debt expense adjusting entry for the year 2012. 2. Show how the various accounts related to accounts receivable should be shown on the December 31, 2012, balance sheet
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