Ex.

182
An inexperienced accountant made the following entries. In each case, the explanation to the
entry is correct.

Dec. 17 Cash........................................................................................
2,940
Sales Discounts....................................................................... 60
Accounts Receivable...................................................... 3,000 (To
record collection of 12/4 sales, terms 2/10, n/30)
20 Cash........................................................................................ 18,360
Notes Receivable .......................................................... 18,000
Interest Revenue ........................................................... 360
(Collection of $18,000, 8%, 90 day note dated Sept. 21.
Interest had been accrued through Nov. 30.)
27 Cash........................................................................................ 1,000
Bad Debts Expense........................................................ 1,000
(Collection of account previously written off as
uncollectible under allowance method)
31 Bad Debts Expense................................................................. 600
Allowance for Doubtful Accounts.................................... 600
(To recognize estimated bad debts based on 1% of
net sales of $600,000)
Instructions
Prepare the correcting entries.
Solution 182 (15 min.)
Dec. 17 Accounts Receivable............................................................ 60
Sales Discounts........................................................... 60
(To correct accounts for granting sales discount
when discount period had lapsed)
20 Interest Revenue.................................................................. 280
Interest Receivable...................................................... 280
[To recognize collection of interest accrued through
November 30 ($18,000 × 8% × 70/360 = $280)]
27 Bad Debts Expense.............................................................. 1,000
Allowance for Doubtful Accounts................................. 1,000
(To correct erroneous collection entry)
31 Bad Debts Expense.............................................................. 5,400
Allowance for Doubtful Accounts................................. 5,400
[To adjust balance in Bad Debts Expense to
$6,000 (1% × $600,000)]