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Chapter 8: Q33PGA (page 478)

Consider the following transactions for CC Publishing.

2018

Dec. 6 Received a \(18,000, 90-day, 6% note in settlement of an overdue accountsreceivable from Go Go Publishing.

31 Made an adjusting entry to accrue interest on the Go Go Publishing note.

31 Made a closing entry for interest revenue.

2019

Mar. 6 Collected the maturity value of the Go Go Publishing note.

Jun. 30 Loaned \)11,000 cash to Lincoln Music, receiving a six-month, 20% note.

Oct. 2 Received a $2,400, 60-day, 20% note for a sale to Tusk Music. Ignore Cost ofGoods Sold.

Dec. 1 Tusk Music dishonored its note at maturity.

1 Wrote off the receivable associated with Tusk Music. (Use the allowance method.)

30 Collected the maturity value of the Lincoln Music note.

Journalize all transactions for CC Publishing. Round all amounts to the nearest dollar.

Short Answer

Expert verified

The debit and credit side of journal totalled $67,246

Step by step solution

01

Definition of the maturity date

The note鈥檚 maturity date is the date when the notes become due. On the maturity date, the amount of the notes receivable is received by the company.

02

Journal entries

Date

Particulars

Debit

Credit

Dec 6, 2018

Note Receivable

$18,000

Accounts Receivable

$18,000

(To entry for notes received)

Dec 31, 2018

Notes Receivable

$300

Interest Revenue18,000脳6%脳25365

$300

(To entry of accrued revenue)

Dec 31, 2018

Interest Revenue

$300

Income Summary

$300

(To closing entry passed)

March 6, 2019

Cash

$18,267

Notes Receivable

$18,000

Interest Revenue

$267

(To entry of cash received)

$18,000脳6%脳90365

June 30

Notes Receivable

$11,000

Cash

$11,000

(To notes received)

October 2

Notes Receivable

$2,400

Sales

$2,4000

(To notes received)

Dec 1

Accounts Receivable

$2479

Notes Receivable

$2,400

Interest receivable

$79

(To notes are dishonored)

Dec 1

Bad Debt Expense

$2,400

Allowance For Bad Debts

$2,400

(To entry of allowance)

Dec 30

Cash

$12,100

Notes Receivable

$11,000

Interest Revenue

$1,100

(To cash received of notes)

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Most popular questions from this chapter

Accounting for uncollectible accounts using the allowance (percent of-sales) and direct write-off methods and reporting receivables on the

balance sheet

On August 31, 2018, Bouquet Floral Supply had a \(140,000 debit balance in AccountsReceivable and a \)5,600 credit balance in Allowance for Bad Debts. During September,

Bouquet made:

鈥� Sales on account, \(550,000. Ignore Cost of Goods Sold.

鈥� Collections on account, \)584,000.

鈥� Write-offs of uncollectible receivables, $4,000.

Requirements

1. Journalize all September entries using the allowancemethod. Bad debts expense wasestimated at 2% of credit sales. Show all September activity in Accounts Receivable,Allowance for Bad Debts, and Bad Debts Expense (post to these T-accounts).

2. Using the same facts, assume that Bouquet used the direct write-off method toaccount for uncollectible receivables. Journalize all September entries using thedirect write-offmethod. Post to Accounts Receivable and Bad Debts Expense, andshow their balances at September 30, 2018.

3. What amount of Bad Debts Expense would Bouquet report on its Septemberincome statement under each of the two methods? Which amount better matchesexpense with revenue? Give your reason.

4. What amount of netaccounts receivable would Bouquet report on its September30, 2018, balance sheet under each of the two methods? Which amount is morerealistic? Give your reason.

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

Applying the allowance method to account for uncollectibles

The Accounts Receivable balance and Allowance for Bad Debts for Signature Lamp

Company at December 31, 2017, was \(10,800 and \)2,000 (credit balance), respectively.

During 2018, Signature Lamp Company completed the following transactions:

a. Sales revenue on account, \(273,400 (ignore Cost of Goods Sold).

b. Collections on account, \)223,000.

c. Write-offs of uncollectibles, \(5,900.

d. Bad debts expense of \)5,200 was recorded

Requirements

1. Journalize Signature Lamp Company鈥檚 transactions for 2018 assuming Signature Lamp Company uses the allowance method.

2. Post the transactions to the Accounts Receivable, Allowance for Bad Debts, and Bad Debts Expense T-accounts, and determine the ending balance of each account.

3. Show how accounts receivable would be reported on the balance sheet at December 31, 2018.

Unique Media Sign Incorporated sells on account. Recently, Unique reported the following figures:

2018

2017

Net Credit Sales

\( 594,920

\)602,000

Net Receivables at end of year

38,500

47,100

Requirements

1. Compute Unique鈥檚 days鈥� sales in receivables for 2018. (Round to the nearest day.)

2. Suppose Unique鈥檚 normal credit terms for a sale on account are 2/10, net 30. How well does Unique鈥檚 collection period compare to the company鈥檚 credit terms? Is this good or bad for Unique?

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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