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Chapter 8: Q20RQ (page 465)
What is the formula to compute interest on a note receivable?
Interest is computed by multiplying notes receivable value with interest rate and time period.
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On August 1, Taylor Company lent $80,000 to L. King on a 90-day, 5% note.
12. Journalize for Taylor Company the lending of the money on August 1.
13. Journalize the collection of the principal and interest at maturity. Specify the date. Round interest to the nearest dollar.
At January 1, 2018, Hilltop Flagpoles had Accounts Receivable of \(28,000, and Allowance for Bad Debts had a credit balance of \)3,000. During the year, Hilltop Flagpoles recorded the following:
a. Sales of \(185,000 (\)164,000 on account; \(21,000 for cash). Ignore Cost of Goods Sold.
b. Collections on account, \)135,000.
c. Write-offs of uncollectible receivables, $2,300.
Requirements
1. Journalize Hilltop鈥檚 transactions that occurred during 2018. The company uses the allowance method.
2. Post Hilltop鈥檚 transactions to the Accounts Receivable and Allowance for Bad Debts T-accounts.
3. Journalize Hilltop鈥檚 adjustment to record bad debts expense assuming Hilltop estimates bad debts as 10% of accounts receivable. Post the adjustment to the appropriate T-accounts.
4. Show how Hilltop Flagpoles will report net accounts receivable on its December 31, 2018, balance sheet
When using the allowance method, how are accounts receivable shown on the balance sheet?
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.)
Question: Endurance Running Shoes reports the following:
2018 | |
May 6 | Recorded credit sales of \(102,000. Ignore Cost of Goods Sold. |
Jul. 1 | Loaned \)18,000 to Jerry Paul, an executive with the company, on a one-year, 7% note |
Dec. 31 | Accrued interest revenue on the Paul note |
2019 | |
Jul. 1 | Collected the maturity value of the Paul note |
Journalize all entries required for Endurance Running Shoes.
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