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Chapter 8: Q24E (page 473)

Journalizing note receivable transactions

The following selected transactions occurred during 2018 and 2019 for Baltic Importers. The company ends its accounting year on September 30.

2018

Jul. 1

Loaned \(16,000 cash to Bud Shyne on a one-year, 8% note.

Sep. 6

Sold goods to Lawn Pro, receiving a 90-day, 6% note for \)11,000. Ignore Cost of Goods Sold.

30

Made a single entry to accrue interest revenue on both notes.

?

Collected the maturity value of the Lawn Pro note.

2019

Jul. 1

Collected the maturity value of the Shyne note.

Journalize all required entries. Make sure to determine the missing maturity date. Round to the nearest dollar

Short Answer

Expert verified

The amount of cash collected on the maturity is $17,280.

Step by step solution

01

Definition of accounts receivables

The accounts receivables mean the amount owed by the company to its debtors. The accounts receivable is a type of current asset for the company.

02

Journalizing entries

The maturity date is determined by counting the actual days from the date of issue. The date of Issues was Sep 6, and the Maturity date was 5th December.

Date

Particulars

Debit

Credit

July 1

Notes Receivables- Bud Shyne

$16,000

Cash

$16,000

(Sold goods on account)

September 6

Accounts Receivable– Lawn Pro

$11,000

Sale Revenue

$11,000

(Sales of goods on account)

September 6

Note Receivable– Lawn Pro

$11,000

Accounts Receivable – Lawn Pro

$11,000

(Note was issued against sale)

September 30

Interest Receivable

$364

Interest Revenue (16,000*8%*3/12)+(11,000*6%*24/360)

$364

(Accrued interest revenue)

December 5

Cash

$11,165

Notes Receivable-

$11,000

Interest Receivable(11,000*6%*24/360)

$44

Interest Revenue (11,000*6%*66/360)

$121

(Collected note receivable plus interest.)

2019

July 1

Cash

$17,280

Notes Receivable-

$16,000

Interest Receivable(16,000*8%*3/12)

$320

Interest Revenue(16,000*8%*9/12)

$960

(Collected note receivable plus interest.)

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Most popular questions from this chapter

Williams Company uses the direct write-off method to account for uncollectible receivables. On July 18, Williams wrote off a

$6,800 account receivable from customer W. Jennings. On August 24, Williams unexpectedly received full payment from Jennings

on the previously written off account.

7. Journalize Williams’s write-off on the uncollectible receivable.

8. Journalize Williams’s collection of the previously written off receivable

Question: A table of notes receivable for 2018 follows:

Principal

Interest

Interest Period During 2018

Note 1

\( 30,000

6%

6 months

Note 2

\) 12,000

10%

270 days

Note 3

\( 14,000

14%

75 days

Note 4

\) 100,000

7%

10 months

For each of the notes receivable, compute the amount of interest revenue earned during 2018. Round to the nearest dollar

What is the difference between accounts receivable and notes receivable?

P8-38B Accounting for uncollectible accounts (aging-of-receivables method),

notes receivable, and accrued interest revenue

Relax Recliner Chairs completed the following selected transactions:

2018

Jul. 1 Sold merchandise inventory to Go-Mart, receiving a \(43,000, nine-month,

16% note. Ignore Cost of Goods Sold.

Oct. 31 Recorded cash sales for the period of \)23,000. Ignore Cost of Goods Sold.

Dec. 31 Made an adjusting entry to accrue interest on the Go-Mart note.

31 Made an adjusting entry to record bad debts expense based on an aging

of accounts receivable. The aging schedule shows that \(14,900 of accounts

receivable will not be collected. Prior to this adjustment, the credit balance

in Allowance for Bad Debts is \)10,700.

2019

Apr. 1 Collected the maturity value of the Go-Mart note.

Jun. 23 Sold merchandise inventory to Allure, Corp., receiving a 60-day, 6% note for

\(7,000. Ignore Cost of Goods Sold.

Aug. 22 Allure, Corp. dishonored its note at maturity; the business converted the

maturity value of the note to an account receivable.

Nov. 16 Loaned \)20,000 cash to Tench, Inc., receiving a 90-day, 8% note.

Dec. 5 Collected in full on account from Allure, Corp.

31 Accrued the interest on the Tench, Inc. note.

Record the transactions in the journal of Relax Recliner Chairs. Explanations are not

required. (Round to the nearest dollar.)

When is bad debts expense recorded when using the direct write-off method?
See all solutions

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