Question1: Prepare journal entries for the following related


Question Description:

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Question1: Prepare journal entries for the following related transactions using the gross method: 1) Sale of inventory on account for $8,000. The cost of the inventory sold is $3,500. Terms 1/5, n/15 2) Receive a return on the above sale for $1,000. The cost of the inventory returned is $300. 3) Determine the accounts receivable balance from the transactions above and prepare the journal entry to show receipt of full payment from the customer in 3 days. 4) Answer the following questions: a) What is the net sales revenue for the three transactions above? b) What is the cost of goods sold amount for the three transactions above? c) What is the gross profit for the three transactions above? d) What is the gross profit percentage for the three transactions above? e) If the inventory turnover rate is 7.2, what does this mean for the company? f) Do you think that the gross profit percentage and inventory turnover rate are related or separate if you are analyzing the company? Why? Question2: On 9/1/13, JEH Company pledged $620,000 of receivables as collateral in exchange for a $500,000 loan at 12% annual interest and a finance fee of 1.5% of accounts receivable. 1) What is the entry (if any) to record the pledging of these receivables on 9/1/13? 2) JEH Company collects $400,000 cash from customers on the pledged receivables during the month of September (9/1/13 to 9/30/13). How would these collections be recorded? 3) Under collateralized borrowings, when cash is received on the receivables (collateral for the loan), the loan is repaid. What is the appropriate journal entry to make the required payment on the loan on 10/1/13 (one month)?

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