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Chapter 8: Q4TI (page 455)

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.

Short Answer

Expert verified

(12) Notes receivable- L. King will be debited and cash will be credited by $80,000, respectively.

(13) Cash account will be debited by $80,986 and Notes Receivable- L. King will be credited by $80,000 and interest revenue will be credited by $986.

Step by step solution

01

Definition of notes receivable

The note is a written contract issued by the borrower to the lender. In this, the borrower promises to pay the money back on some future date.

02

Journal entry for lending the money

Date

Particulars

Debit

Credit

August 1

Notes Receivable- L. King

$80,000

Cash

$80,000

(Accepting notes in exchange for cash)

03

Journal entry for the maturity of the bond

Date

Particulars

Debit

Credit

October 30

Cash

$80,986

Notes Receivable- L. King

$80,000

Interest Revenue ($80,000 x 5% x 90/365)

$986

(Collection of notes and interest)

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Most popular questions from this chapter

Recording credit sales and collections

Steller Corporation had the following transactions in June:

Jun .1

Sold merchandise inventory on account to Carter Company, \(1,575.

6

Sold merchandise inventory for cash, \)550

12

Received cash from Carter Company in full settlement of its accounts receivable

20

Sold merchandise inventory on account to Iris Company, \(765

22

Sold merchandise inventory on account to Driver Company, \)230

28

Received cash from Iris Company in partial settlement of its accounts receivable, \(300

Requirements

1. Journalize the transactions. Ignore Cost of Goods Sold. Omit explanations.

2. Post the transactions to the general ledger and the accounts receivable subsidiary

ledger. Assume all beginning balances are \)0.

3. Verify the ending balance in the control Accounts Receivable equals the sum of the

balances in the subsidiary ledger.

What do the days’ sales in receivables indicate, and how is it calculated?

Johnson Company uses the allowance method to account for uncollectible receivables. On September 2, Johnson wrote off a

\(14,000 account receivable from customer J. Mraz. On December 12, Johnson unexpectedly received full payment from Mraz on

the previously written off account. Johnson records an adjusting entry for bad debts expense of \)800 on December 31.

9. Journalize Johnson’s write-off of the uncollectible receivable.

10. Journalize Johnson’s collection of the previously written off receivable.

11. Journalize Johnson’s adjustment for bad debts expense.

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’s 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’s 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.

Accounting for notes receivable and accruing interestLogan Realty loaned money and received the following notes during 2018.Note Date Principal Amount Interest Rate Term

(1) Oct. 1 $ 16,000 7% 1 year

(2) Jun. 30 18,000 18% 9 months

(3) Sep. 19 12,000 8% 90 days

Requirements

1. Determine the maturity date and maturity value of each note.

2. Journalize the entries to establish each Note Receivable and to record collection ofprincipal and interest at maturity. Include a single adjusting entry on December 31,2018, the fiscal year-end, to record accrued interest revenue on any applicable note.Explanations are not required. Round to the nearest dollar.
See all solutions

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