Accounting I   © 2008 Tibebe S. Mengistu

Assignments for Principles of Accounting I Chapter 4

Assignment 1

A University Bookstore ordered 500 copies of an introductory economics textbook from a publisher on July 17, 20X8. The books
were delivered on August 12, at which time a bill was sent requesting payment of $40 per book. However, a 2% discount was
allowed if the publisher received payment by September 12. University Bookstore sent the proper payment, which was received by
the Publisher on September 10. On December 18, University Bookstore returned 60 books to the publisher for a full cash refund.

1. Prepare the journal entries (if any) for the publisher on
a.July 17
b. August 12
c. September 10 and
d. December 18. Include appropriate explanations.

2. Suppose this was the only sales transaction in 20X8. Prepare the revenue section of the publisher's income statement.

Assignment 2

Gemini Company borrowed $100,000 from First Bank at 8% interest. The loan agreement stated that a compensating balance of
$10,000 must be kept in the Gemini checking account at First Bank. The total Gemini cash balance at the end of the year was
1. How much usable cash did Gemini Company received for its $100,000 loan?
2. What was the real interest rate paid by Gemini?

Assignment 3

International Metal Products, Inc reported the following in the 20X8 statement. ($ in thousands):

Net Sales $600
Cash discounts on sales 20
Sales returns and allowances 30

1. Prepare the revenue section of the 20X8 income statement.
2. Prepare journal entries for
a. initial revenue recognition for 20X8 sales
b. sales return and allowances and
c. collection of accounts receivable.

Assume that all sales were on credit and all accounts receivables for 20X8 sales were collected in 20X8.