PART A (8 marks) During 2021, Rehana Inc. recorded sales as follows: Cash sales,...
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Accounting
PART A (8 marks)
During 2021, Rehana Inc. recorded sales as follows: Cash sales, $300,000, and credit sales, $150,000. At 12/31/2021, before the adjusting entries, Accounts receivable showed a debit balance of $90,000 and Allowance for Doubtful Accounts showed a credit balance of $600. Required: (a) Assuming a bad debt of $150 is to be written off, give the journal entry on 12/31/2021. (2 MARKS)
(b) Give the adjusting entry for bad debt expense at 12/31/21, assuming bad debt losses are estimated to be 1 percent of credit sales. (2 MARKS)
(c) Give the adjusting entry for bad debt expense at 12/31/2021, assuming instead that bad debt losses are estimated to be 2 percent of the balance in the Accounts receivable account (take transaction (a) into account). (4 MARKS)
PART B (7 MARKS)
Tammy Inc. held a one-year, $3,000, 8 percent interest-bearing note receivable. After holding it for 2 months, the company discounted (sold) it to the bank at 10 percent.
REQUIRED:
Show the entry to record the sale of the note. Assume interest revenue is not recorded before the note is discounted. (7 MARKS)
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