/*! This file is auto-generated */ .wp-block-button__link{color:#fff;background-color:#32373c;border-radius:9999px;box-shadow:none;text-decoration:none;padding:calc(.667em + 2px) calc(1.333em + 2px);font-size:1.125em}.wp-block-file__button{background:#32373c;color:#fff;text-decoration:none} Q10SE Question: On June 6, Lakeland Ba... [FREE SOLUTION] | 91影视

91影视

Log out

Learning Materials

Features

Discover

Chapter 8: Q10SE (page 468)

Question: On June 6, Lakeland Bank & Trust lent $80,000 to Stephan Stow on a 30-day, 9% note.

Requirements

1. Journalize for Lakeland the lending of the money on June 6.

2. Journalize the collection of the principal and interest at maturity. Specify the date Round to the nearest dollar

Short Answer

Expert verified

Answer:

(1) Notes receivable 鈥� Stephan Stow account is debited and cash account is credited by $80,000, respectively.

(2) cash account is debited by $80,592, and notes receivable 鈥� Stephan Stow is credited by $80,000 and interest revenue by $592.

Step by step solution

01

Definition of notes receivable

The notes receivable means the note that is received by the company. The notes receivable are issued by the debtor of the company and the debtor pays interest to the company on the notes.

02

Step 2: Journal entry of lending money

Date

Account and explanation

Debit

Credit

June 6

Notes receivable 鈥� Stephan Stow

$ 80,000

Cash

$80,000

(9% notes accepted by the company,)

03

 Step 3: Journal entry of a collection of principal and interest

Date

Account and explanation

Debit

Credit

July 6

Cash

$80,592

Note Receivable- Stephan Stow

$80,000

Interest Revenue

$592

(Collected 9% note receivable with interest.)

04

Computation of interest revenue on maturity

Interest鈥�鈥�Note鈥�=Principal脳Rate脳Time鈥�鈥�Period=$80,000脳9%脳30365=$592

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Over 30 million students worldwide already upgrade their learning with 91影视!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

What is a critical element of internal control in the handling of receivables by a business? Explain how this element is accomplished.

During August 2018, Lima Company recorded the following:

鈥� Sales of \(133,300 (\)122,000 on account; \(11,300 for cash). Ignore Cost of Goods Sold.

鈥� Collections on account, \)106,400.

鈥� Write-offs of uncollectible receivables, \(990.

鈥� Recovery of receivable previously written off, \)800.

Requirement:

1. Journalize Lima鈥檚 transactions during August 2018, assuming Lima uses the direct write-off method.

2. Journalize Lima鈥檚 transactions during August 2018, assuming Lima uses the allowance method

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

Accounting for uncollectible accounts using the allowance method

This problem continues the Canyon Canoe Company situation from Chapter 7.

Canyon Canoe Company has experienced rapid growth in its first few months of operations and has had a significant increase in customers renting canoes and purchasing T-shirts. Many of these customers are asking for credit terms. Amber and Zack Wilson, stockholders and company managers, have decided it is time to review their business transactions and update some of their business practices. Their first step is to make decisions about handling accounts receivable.

So far, year-to-date credit sales have been \(15,500. A review of outstanding

receivables resulted in the following aging schedule:


Age of Accounts as of June 30, 2019

Customer name

1-30 days

31-60 days

61-90 days

Over 90 days

Total balance

Canyon

\)250

\(250

Crazy trees

\)200

\(150

\)350

Early start Daycare

\(500

Lakefront Pavilion

\)575

\(500

\)575

Outdoor Center

\(300

\)300

Rivers Canoe Club

\(350

\)350

Sport Shirts

\(450

\)120

\(570

Zack鈥檚 Marina

\)75

\(75

\)225

Totals

\(1,900

\)345

\(375

\)500

$3,120

Requirements

1. The company wants to use the allowance method to estimate bad debts. Determine the estimated bad debts expense under the following methods at June 30, 2019. Assume a zero-beginning balance for Allowance for Bad Debts. Round to the nearest dollar.

a. Percent-of-sales method, assuming 4.5% of credit sales will not be collected.

b. Percent-of-receivables method, assuming 22.5% of receivables will not be

collected.

c. Aging-of-receivables method, assuming 5% of invoices 1鈥�30 days will not be

collected, 20% of invoices 31鈥�60 days, 40% of invoices 61鈥�90 days, and 75% of

invoices over 90 days.

2. Journalize the entry at June 30, 2019, to adjust for bad debts expense using the percent-of-sales method.

3. Journalize the entry at June 30, 2019, to record the write-off of the Early Start Daycare invoice.

4. At June 30, 2019, open T-accounts for Accounts Receivable and Allowance for Bad Debts before Requirements 2 and 3. Post entries from Requirements 2 and 3 to those accounts. Assume a zero beginning balance for Allowance for Bad Debts.

5. Show how Canyon Canoe Company will report net accounts receivable on the balance sheet on June 30, 2019.

Sleepy Recliner Chairs completed the following selected transactions:

2018

Jul. 1 Sold merchandise inventory to Stan-Mart, receiving a \(41,000, nine-month, 8%

note. Ignore Cost of Goods Sold.

Oct. 31 Recorded cash sales for the period of \)24,000. Ignore Cost of Goods Sold.

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

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

of accounts receivable. The aging schedule shows that \(13,800 of accounts

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

Allowance for Bad Debts is \)11,800.

2019

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

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

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

Aug. 22 Appeal, Corp. dishonoured its note at maturity; the business converted the

maturity value of the note to an account receivable.

Nov. 16 Loaned \)17,000 cash to Crosby, Inc., receiving a 90-day, 16% note.

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

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

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

required. (Round to the nearest dollar.)
See all solutions

Recommended explanations on Business Studies Textbooks

Business Operations

Read Explanation

Managers

Read Explanation

Corporate Finance

Read Explanation

International Business

Read Explanation

Actuarial Science in Business

Read Explanation

Intermediate Accounting

Read Explanation
View all explanations

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.