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Chapter 8: Q22E (page 472)

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.

Short Answer

Expert verified

Answer:

Journal entries are recorded in Step 2.

Step by step solution

01

Definition of notes receivables

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

Journalizing transactions

Interest鈥�鈥�Amount=鈥�鈥�Loan鈥�鈥�鈥�Amount脳鈥�Interest鈥�鈥�Rate脳鈥�Time鈥�鈥�Period=$18,000脳7%脳612=$630

Date

Particulars

Debit

Credit

May 06

Accounts Receivables

$102,000

Sales Revenue

$102,000

(Sold goods on account)

July 1

Notes Receivable- Jerry Paul

$18,000

Cash

$18,000

(Lend money to Jerry Paul)

December 31

Interest Receivable

$630

Interest Revenue

$630

(Accrued interest revenue)

2019

July 01

Cash

$19,260

Notes Receivable

$18,000

Interest Receivable

$630

Interest Revenue

$630

(Collected note receivable plus interest.)

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Most popular questions from this chapter

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

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

Question: McKale Corporation has a three-month, $18,000, 9% note receivable from L. Peters that was signed on June 1, 2018. Peters defaults on the loan on September 1.

Journalize the entry for McKale to record the default of the loan

Accounting for uncollectible accounts using the allowance method (aging-of-receivables) and reporting receivables on the balance sheet.

At December 31, 2018, the Accounts Receivable balance of GPS Technology is \(200,000. The Allowance for Bad Debts account has a \)24,110 debit balance. GPS Technology prepares the following aging schedule for its accounts receivable:

Age of Accounts

1鈥�30 Days

31鈥�60 Days

61鈥�90 Days

Over 90 Days

Accounts Receivable

\( 65,000

\) 50,000

\(40,000

\)45,000

Estimated percent uncollectible

0.4%

3.0%

5.0%

48.0%

Requirement:

1. Journalize the year-end adjusting entry for bad debts on the basis of the aging schedule. Show the T-account for the Allowance for Bad Debts at December 31, 2018.

2. Show how GPS Technology will report its net accounts receivable on its December 31, 2018, balance sheet

Dialex Watches completed the following selected transactions during 2018 and 2019:

2018

Dec. 31 Estimated that bad debts expense for the year was 3% of credit sales of

\(410,000 and recorded that amount as expense. The company uses the

allowance method.

31 Made the closing entry for bad debts expense.

2019

Jan. 17 Sold merchandise inventory to Marty White, \)400, on account. Ignore Cost of

Goods Sold.

Jun. 29 Wrote off Marty White鈥檚 account as uncollectible after repeated efforts to

collect from him.

Aug. 6 Received \(400 from Marty White, along with a letter apologizing for being

so late. Reinstated White鈥檚 account in full and recorded the cash receipt.

Dec. 31 Made a compound entry to write off the following accounts as uncollectible:

Barry Krisp, \)1,600; Maria Bryant, \(1,100; and Richard Renik, \)400.

31 Estimated that bad debts expense for the year was 3% on credit sales of

\(490,000 and recorded the expense.

31 Made the closing entry for bad debts expense.

Requirements

1.Open T-accounts for Allowance for Bad Debts and Bad Debts Expense, assuming

the accounts begin with a zero balance. Record the transactions in the general

journal (omit explanations), and post to the two T-accounts.

2.Assume the December 31, 2019, balance of Accounts Receivable is \)136,000. Show

how net accounts receivable would be reported on the balance sheet at that date.
See all solutions

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