PROBLEM
1.On May 20, Major Wholesalers purchased 2,000 chairs at an invoice price of $150 each and paid for them on May 30, earning a 2% cash discount. Major sold all of the chairs at $200 each. The customer also earned a 2% cash discount.
a. What amount should Major report as net sales?
b. What amount should Major report as cost of goods sold?
2.Flextronics Corporation sold merchandise with a sales price of $20 million during 2007. Flextronics allowed its customers $4 million of quantity discounts. Flextronics expects a return rate of 6% of the amount billed, which is net of the discount. How much revenue (after discounts) should Flextronics report for 2007?
3.Klondike Company reported accounts receivable at the end of 2006 of $5,000,000 before allowing for doubtful accounts. During 2007, it recorded sales of $24 million on credit and collected $22 million from customers. At the end of 2007, before adjustments, Klondike had a $200,000 balance in allowance for doubtful accounts and estimated that it required an allowance equal to 5% of accounts receivable.
a.What was the net amount of accounts receivable reported on the 2007 balance sheet?
b.What amount of doubtful accounts expense did Klondike report for 2007?