Select your language

Suggested languages for you:
Log In Start studying!
Answers without the blur. Just sign up for free and you're in → Illustration

Q24E

Expert-verified
Horngren'S Financial And Managerial Accounting
Found in: Page 473

Short Answer

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

The amount of cash collected on the maturity is $17,280.

See the step by step solution

Step by Step Solution

Step 1: Definition of accounts receivables

The accounts receivables mean the amount owed by the company to its debtors. The accounts receivable is a type of current asset for the company.

Step 2: Journalizing entries

The maturity date is determined by counting the actual days from the date of issue. The date of Issues was Sep 6, and the Maturity date was 5th December.

Date

Particulars

Debit

Credit

July 1

Notes Receivables- Bud Shyne

$16,000

Cash

$16,000

(Sold goods on account)

September 6

Accounts Receivable– Lawn Pro

$11,000

Sale Revenue

$11,000

(Sales of goods on account)

September 6

Note Receivable– Lawn Pro

$11,000

Accounts Receivable – Lawn Pro

$11,000

(Note was issued against sale)

September 30

Interest Receivable

$364

Interest Revenue (16,000*8%*3/12)+(11,000*6%*24/360)

$364

(Accrued interest revenue)

December 5

Cash

$11,165

Notes Receivable-

$11,000

Interest Receivable(11,000*6%*24/360)

$44

Interest Revenue (11,000*6%*66/360)

$121

(Collected note receivable plus interest.)

2019

July 1

Cash

$17,280

Notes Receivable-

$16,000

Interest Receivable(16,000*8%*3/12)

$320

Interest Revenue(16,000*8%*9/12)

$960

(Collected note receivable plus interest.)

Most popular questions for Business-studies Textbooks

This problem continues the Crystal Clear Cleaning problem begun in Chapter 2 and

continued through Chapter 7.

Crystal Clear Cleaning uses the allowance method to estimate bad debts. Consider the following April 2019 transactions for Crystal Clear Cleaning:

Apr. 1 Performed cleaning service for Debbie’s D-list for $13,000 on account with

terms n/20.

10 Borrowed money from First Regional Bank, $30,000, making a 180-day, 12% note.

12 After discussions with customer More Shine, Crystal Clear has determined that

$230 of the receivable owed will not be collected. Wrote off this portion of the

receivable.

15 Sold goods to Warner for $9,000 on account with terms n/30. Cost of Goods Sold

was $4,500.

28 Sold goods to Lelaine, Inc. for cash of $2,800 (cost $840).

28 Collected from More Shine, $230 of receivable previously written off.

29 Paid cash for utilities of $150.

30 Created an aging schedule for Crystal Clear Cleaning for accounts receivable.

Crystal Clear determined that $7,000 of receivables outstanding for 1–30 days

were 3% uncollectible, $10,000 of receivables outstanding for 31–60 days were

20% uncollectible, and $5,870 of receivables outstanding for more than 60 days

were 30% uncollectible. Crystal Clear Cleaning determined the total amount of

estimated uncollectible receivables and adjusted the Allowance for Bad Debts.

Assume the account had an unadjusted credit balance of $260. (Round to

nearest whole dollar.)

Requirements

1. Prepare all required journal entries for Crystal Clear. Omit explanations.

2. Show how net accounts receivable would be reported on the balance sheet as of

April 30, 2019.

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’s 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 1–30 days will not be

collected, 20% of invoices 31–60 days, 40% of invoices 61–90 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.

Icon

Want to see more solutions like these?

Sign up for free to discover our expert answers
Get Started - It’s free

Recommended explanations on Business-studies Textbooks

94% of StudySmarter users get better grades.

Sign up for free
94% of StudySmarter users get better grades.