Delta Automotive Corporation h
Delta Automotive Corporation has the following assets listed inits 12/31/2021 trial balance:
| Cash in bank—checking account | $ | 38,500 | |
| U.S. Treasury bills (mature in 60 days)* | 6,000 | ||
| Cash on hand (currency and coins) | 2,950 | ||
| U.S. Treasury bills (mature in six months)* | 26,000 | ||
| Undeposited customer checks | 3,440 | ||
*Purchased on 11/30/21Required:1. Determine the correct balance of cash and cashequivalents to be reported in the current asset section of the 2021balance sheet.
2. Tracy Company, a manufacturer of air conditioners, sold 200units to Thomas Company on November 17, 2021. The units have a listprice of $650 each, but Thomas was given a 30% trade discount. Theterms of the sale were 3/10, n/30.
3-a. Prepare the journal entries to record thesale on November 17 (ignore cost of goods) and collection onNovember 26, 2021, assuming that the net method of accounting forcash discounts is used.3-b. Prepare the journal entries to record thesale on November 17 (ignore cost of goods) and collection onDecember 15, 2021, assuming that the net method of accounting forcash discounts is used.
Answer:
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1. Cash and cash equivalentsincludes: |
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Cash in bank—checkingaccount |
$38,500 |
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U.S. treasury bills |
$6,000 |
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Cash on hand |
$2,950 |
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Undeposited customerchecks |
$3,440 |
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Total |
$50,890 |
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Journal |
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17-Nov |
Accounts receivable – ThomasCompany |
91,000 |
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Sales |
91,000 |
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26-Nov |
Cash |
88,270 |
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Sales discount |
2,730 |
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Accounts receivable – ThomasCompany |
91,000 |
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List price = $650 perunit |
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Trade discount = 30% |
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= 650 x 30% |
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= $195 |
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Selling price per unit = List price- Trade discount |
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650 – 195 |
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= $455 |
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Total sales = Selling price perunit x Number of units sold |
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= 455 x 200 |
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= $91,000 |
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Sales discount = Sales x Discountrate |
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= 91,000 x 3/10 |
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= $2,730 |
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Cash received from Thomas Company =Total sales – Sales discount |
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= 91,000 – 2,730 |
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= $88,270 |
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Journal |
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17-Nov |
Accounts receivable – ThomasCompany |
91,000 |
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Sales |
91,000 |
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15-Dec |
Cash |
91,000 |
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Accounts receivable – ThomasCompany |
91,000 |
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