Assignment
1. Gross profit method.
Utley Co. prepares monthly income statements. Inventory is counted only at year end; thus, month-end inventories must be estimated. All sales are made on account. The rate of mark-up on cost is 20%. The following information relates to the month of May.
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Accounts receivable, May 1
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$21,000
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Accounts receivable, May 31
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15,000
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Collections of accounts during May
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96,000
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Inventory, May 1
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45,000
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Purchases during May
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58,000
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Instructions
Calculate the estimated cost of the inventory on May 31.
2. Entries for bad debt expense.
A trial balance before adjustment included the following:
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Debit
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Credit
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Accounts receivable
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$120,000
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|
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Allowance for doubtful accounts
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730
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Sales
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$510,000
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Sales returns and allowances
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8,000
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Give journal entries assuming that the estimate of uncollectibles is determined by taking (1) 5% of gross accounts receivable and (2) 1% of net sales.