Problem 5-4

Relentless Company
Requirement A

1. Accounts RReceivable 2,600,000

Sales (3,070,000-470,000) 2,600,000

2. Cash 2,455,000-1,455,000 1,000,000

Accounts Receivable 1,000,000

3. Cash 1,455,000
Sales Discount 45,000
Accounts Receivabl (1,455,000/97%) 1,500,000

4. Allowance for doubtful accounts 20,000

Accounts Receivable 20,000

5. Cash 470,000
Sales 470,000

6. Sales return and allowances 55,000

Accounts Receivable 55,000

7. Sales returns and allowances 10,000

Cash 10,000

8. Accounts Receivable 5,000

Allowance for doubtful accounts 5,000

Cash 5,000
Accounts Receivable 5,000

Requirement B

Credit Sales 2,600,000

Less:Sales Discount 45,000
Sales Return and allowances 55,000 100000
Net Credit Sales 2,500,000

Doubtful Account (2,500,000x 2%) 50,000

Doubtful account 50,000

Allowance for doubtful accounts 50,000
Requirements C

Accounts Receivable 625,000

Less: Allowance for Doubtful Accounts 50,000
Net Realizable Value 575,000
Problem 5-5
Nostalgia Company

Requirements A

1. Accounts Receivable 7,935,000

Sales 7,935,000

2. Cash 4,410,000
Sales Discount 90,000
Accounts Receivable 4,500,000

3. Cash 2,475,000
Sales Discount 25,000
Accounts Recievable 2,500,000

4. Accounts Receivable 15,000

Allowance for doubtful accounts 15,000

Cash 15,000
Accounts Receivable 15,000

5. Cash 1,100,000
Accounts Receivable 1,100,000

6. Allowance for doubtful accounts 55,000

Accounts Receivable 55,000

7. Sales Return 30,000

Accounts Receivable 30,000

Requirement B

Rate
60,000/1,500,00 4%

Required Allowance 1,250,000 x 4% 50,000

Allowances before adjustments 60,000 + 15,000 - 55,000 20,000
Increase in Allowance 30,000

Doubtful Accounts 30,000

Allowance for doubtful Accounts 30,000
Requirement C

Accounts Receivable - Dec. 31 1,250,000

Less: Allowance for doubtful accounts 50,000
Net Realizable Value 1,200,000