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Discussion number 1. On January 10, Donna Stark uses her Baver Co. credit card to...

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Question

Accounting

Discussion number 1.

On January 10, Donna Stark uses her Baver Co. credit card to purchase merchandise from Baver Co. for $2,600. On February 10, she is billed for the amount due of $2,600. On February 12, Stark pays $1,600 on the balance due. On March 10, Stark is billed for the amount due, including interest at 1% per month on the unpaid balance as of February 12.

Instructions

Prepare the entries on Baver Co.'s books related to the transactions that occurred on January 10, February 12, and March 10.

Disussion number 2.

An inexperienced accountant made the following entries. In each case, the explanation to the entry is correct. Assume that at 12/31, the correct balance of the Allowance account before adjustment is $-0-.

Dec.17Cash3,000

Sales Discounts60

Accounts Receivable3,060

(To record collection of 12/4 sales of $3,000, terms 2/10, n/30)

27Cash1,200

Bad Debt Expense1,200

(Collection of account previously written off as

uncollectible under allowance method)

31Bad Debt Expense1,800

Allowance for Doubtful Accounts1,800

(To recognize estimated bad debts based on 3% of

accounts receivable of $600,000)

Instructions

Prepare the correcting entries.

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