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.
Loaned $16,000 cash to Bud Shyne on a one-year, 8% note.
Sold goods to Lawn Pro, receiving a 90-day, 6% note for $11,000. Ignore Cost of Goods Sold.
Made a single entry to accrue interest revenue on both notes.
Collected the maturity value of the Lawn Pro note.
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.
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.
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.
Notes Receivables- Bud Shyne
(Sold goods on account)
Accounts Receivable– Lawn Pro
(Sales of goods on account)
Note Receivable– Lawn Pro
Accounts Receivable – Lawn Pro
(Note was issued against sale)
Interest Revenue (16,000*8%*3/12)+(11,000*6%*24/360)
(Accrued interest revenue)
Interest Revenue (11,000*6%*66/360)
(Collected note receivable plus interest.)
(Collected note receivable plus interest.)
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
1. Journalize Signature Lamp Company’s 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.
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
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
15 Sold goods to Warner for $9,000 on account with terms n/30. Cost of Goods Sold
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.)
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|
Over 90 days
Early start Daycare
Rivers Canoe Club
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
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.
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