Answer:
Answer for the question
Furtastic manufactures imitation fur garments. On June 1, 2016, Furtastic made a sale to Willett’s Department Store under terms that require Willett to pay $150,000 to Furtastic on June 30, 2016. In a separate transaction on June 15, 2016, Furtastic purchased brand advertising services from Willett for $12,000. The fair value of those advertising services is $5,000. Furtastic expects that 3% of all sales will prove uncollectible.Required:1. to 3.Prepare the journal entries to record the transactions above. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
Is given in the attachment.
Explanation:
Answer:
1. On June 1, 2016
Debit Accounts receivable $150,000
Credit Revenue $150,000
Being entries to record sales on account
On June 15, 2016
Debit Advertising expense $12,000
Credit Cash/Accounts payable $12,000
Being entries to record advertising expense incurred
For the assessment that 3% of all sales may be uncollectible, entries required are;
Debit Bad debt expense $4,500
Credit Allowance for doubtful debt $4,500
Being entries to account for doubtful debts
Explanation:
When sales is made on credit/accounts, debit accounts receivable and credit revenue. In an instance where it is assessed that some or all of these receivables may be uncollectible, entries required are debit bad debt expense and credit allowance for doubtful debt.
When the debts are confirmed as bad, debit doubtful debt and credit accounts receivable to completely write off these debts.
3% of all sales
= 3% × $150,000
= $4,500
For expense incurred, debt expense and credit cash or accounts payable with the actual amount paid for the expense.
