PRINCIPLE OF ACCOUNTING

Final Exam, Set B

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Question 1

The following transactions were selected from the records of Xue Company in the first
quarter of 2020.
Jan. 12 Sold merchandise to Qian, who charged the $6,000 purchase on his
Visa credit card. Visa charges Xue a 2 percent credit card fee.
15 Sold merchandise to Haojing at an invoice price of $5,000; terms 2/10,
n/45.
20 Sold merchandise to Guoqing at an invoice price of $4,000; terms 2/10,
n/45.
23 Collected payment from Haojing from the January 15 sale.
Feb. 15 Guoqing returned $360 worth of merchandise and received account
credit.
25 Collected payment from Guoqing from the January 20 sale.
Mar. 4 Sold merchandise to Haojing at an invoice price of $17,460; terms 2/10,
n/45.
15 Collected payment from a customer from a sale last year.

Xue uses an estimated bad debt rate of 5 percent of net credit sales. Also, Xue
Company’s balance sheet shows the following amounts,
January 1, 2020 March 31, 2020
Accounts receivable (net of allowances of $25,000 $27,800
$2,400 and $1,600, respectively)

First, prepare the journal entry for the credit card sale on January 12.
Debits Credits
Cash ___(3)___
___(1)___ ___(4)___
___(2)___ ___(5)___
Record the collection of Haojing’s payment from the January 15 sale.
Debits Credits
Cash ___(8)___
___(6)___ ___(9)___
___(7)___ ___(10)___

Now, compute the following amounts or ratios.

Net sales of Q1, 2020 ___(11)___
Bad debt expense of Q1, 2020 ___(12)___
Write-off during Q1, 2020 ___(13)___
Account receivable turnover ratio (rounded to the nearest 0.01) ___(14)___

Prepare the journal entry for the write-off.

Debits Credits
___(15)___ ___(17)___
___(16)___ ___(17)___

Finally, prepare the journal entry for the collection of payment on March 15, 2020.
Debits Credits
___(18)___ ___(20)___
___(19)___ ___(20)___