Customers paying beyond the discount period:

10-day discount period 4,410,000 (4,410,000/98%)*2% 90000

15-day discount period 2,475,000 (2,475,000/99%)*1% 25000
Recovery of accounts written off 15,000
6,900,000

Cash received from customers 8,000,000-6,900,000

1,100,000
 NOSTALGIA COMPANY
Journal Entries
Account Name Debit Credit
Accounts Receivable 7,935,000
Sales 7,935,000

Cash 4,410,000
Sales Discount 90,000 (4,410,000/98%)*2%
Accounts Receivable 4,500,000 4,410,000+90,000

Cash 2,475,000
Sales Discount 25,000 (2,475,000/99%)*1%
Accounts Receivable 2,500,000 2,475,000+25,000

Accounts Receivable 15,000

Allowance for Doubtful Accounts 15,000

Cash 15,000
Accounts Receivable 15,000

Cash 1,100,000
Accounts Receivable 1,100,000

Allowance for Doubtful Accounts 55,000

Accounts Receivable 55,000

Sales Return 30,000

Accounts Receivable 30,000
Doubtful Accounts Expense 30,000
Allowance for Doubtful Accounts 30,000

Rate (60,000/1,500,000) 4%
Required Allowance (4%*1,250,000) 50,000
Allowance before Adjustments (60,000+15,000-55,000) 20000
Doubtful Accounts 30,000
Accounts Receivable 1,250,000
Allowance for Doubtful Accounts -50,000
Net Realizable Value 1,300,000

Accounts Receivable
1,500,000 8,000,000
7,935,000 115,000
15,000 55,000
30,000
9,450,000 8,200,000
1,250,000

Allowance for Doubtful Accounts

55,000 60,000
15,000
30,000

55,000 105,000
50,000