Introduction:
Dishonouring a note: When the maker does not pay the full amount on the date of maturity then a note is honored.
Notes Receivable: It refers to the account on the balance sheet which usually comes under the current assets section if the life of note receivable is less than a year. Note receivable refers to the document which promises to receive the amount in the future. This amount usually includes interest and principal amount.
The date on which repayment of notes is must with the interest of that specific holding period is called a maturity date. Generally, the notes period is in day’s means it is less than a year.
For the borrower, the cost of borrowing money and the profit from lending money is regarded as the interest on notes receivable.
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Loose Leaf for Financial Accounting: Information for Decisions
- Aron Larson is a customer of Bank Enterprises. Mr. Larson took out a loan in the amount of $120,000 on August 1. On December 31, Bank Enterprises determines the loan to be uncollectible. Larson had not paid anything toward the balance due on account. What is the journal entry recording the bad debt write-off?arrow_forwardRecord the following transactions in general journal form for Koonce Company. Jul 1 Received a $5,000 3-month, 5%, note, dated July 1, from Ruth Jordan in payment of her open account. Sep 30 Received notification from Ruth Jordan that she was unable to honour her note at this time. It is expected that Jordan will pay at a later date. Nov 15 Received full payment from Ruth Jordan for note receivable previously dishonoured. No additional financing charges were charged.arrow_forwardTimmons Company had a January 1 credit balance in its Allowance for Doubtful Accounts of $7,000 for the current year. The following transactions and events affected the Allowance for Doubtful Accounts during the current year: Apr. 15 Bard’s account receivable of $5,700 was deemed un-collectable. July 1 Drake paid the full amount of a previously written-off account receivable. This receivable of $2,300 had been written off in the prior year. Dec. 31 Bad debts expense of $7,500 was recorded. What amount should appear in the allowance for doubtful accounts in the December 31 balance sheet for the current year?arrow_forward
- Prapare the journal entry for the following: December 17: Byte was informed that Mr. Madoff who has an account with the company will never pay the $618.00 he owes. Record the transaction to write off Mr. Madoff's accounts receivable account using the allowance method.arrow_forwardJanuary 27 Received Lee's payment for principal and interest on the note dated December 13. March 3 Accepted a $14,000, 8%, 90-day note in granting a time extension on the past-due account receivable of Tomas Company. March 17 Accepted a $18,000, 30-day, 10% note in granting H. Cheng a time extension on his past-due account receivable. April 16 H. Cheng dishonored his note. May 1 Wrote off the H. Cheng account against the Allowance for Doubtful Accounts. June 1 Received the Tomas payment for principal and interest on the note dated March 3. Complete the table to calculate the interest amounts and use those calculated values to prepare your journal entries. Note: Do not round intermediate calculations. Use 360 days a year.arrow_forwardJudy Smith owed the Flower Company $3,200 on account by February 25. After several attempts to the collect the money that was owed, Flower Company wrote off Judy's account as uncollectible on August 31. On December 15 Flower Company received a check from Judy Smith for the full $3,200 that she had owed the company. The company's fiscal year ended on December 31. Which of the following journal entries is recorded to reinstate the account when using the direct write-off method? a.Debit Accounts Receivable $3,200 and credit Uncollectible Accounts Recovered $3,200 b.Debit Bad Debt Expense $3,200 and credit Accounts Receivable $3,200 c.Debit Accounts Receivable $3,200 and credit Bad Debt Expense $3,200 d.Debit Allowance for Doubtful Accounts $3,200 and credit Bad Debt Expense $3,200arrow_forward
- Prepare journal entries to record these transactions: Mar. 21 Accepted a $6,200, six-month, 4% note dated today from Bradley Brooks in granting a time extension on his past-due account. Sept. 21 Brooks dishonoured his note when presented for payment. Dec. 31 After exhausting all legal means of collection, wrote off Brooks's account against the Allowance for Doubtful Accounts. View transaction list Journal entry worksheetarrow_forwardBennett Company uses the allowance method to account for uncollectible accounts. Prepare the appropriate journal entries to record the following transactions during 2010. You may omit journal entry explanations. June 20 The account of Ken Watts for $1,000 was deemed to be uncollectible and is written off as a bad debt. Received a check for $1,000 from Ken Watts, whose account had previously been written off as uncollectible. Oct. 14 Dec. 31 Use the following information for year-end adjusting entries: The balance of Accounts Receivable and Allowance for Doubtful Accounts at year end are $131,000 and $2,900, respectively. It is estimated that bad debts will be 4% of accounts receivable.arrow_forwardFollowing are transactions for Vitalo Company. November 1 Accepted a $5,000, 180-day, 5% note from Kelly White in granting a tine extension on her past-due account receivable. December 31 Adjusted the year-end accounts for the accrued interest earned on the White note.. April 30 white honored her note when presented for payment. Complete the table to calculate the interest amounts at December 31st and April 30th and use those calculated values to prepare your Journal entries. Note: Do not round intermediate calculations. Use 360 days a year.arrow_forward
- On January 1, Cooper Company accepted a one-year note for $5,000 at 4% from one of its customers. When the note matured on December 31, the customer was unable to pay, and the company treated it as a dishonored note. Prepare the journal entry that Cooper will make to record the dishonored note. Omit explanation.arrow_forwardFollowing are transactions for Veilstone Jewelers. November 1 Accepted a $15,000, 180-day, 5% note from Vitalo in granting a time extension on her past-due account receivable. December 31 Adjusted the year-end accounts for the accrued interest earned on the White note. April 30 Vitalo honored her note when presented for payment. Calculate the interest amounts at December 31st and April 30th and use those calculated values to prepare your journal entries. Note: Do not round intermediate calculations. Use 360 days a year. Complete this question by entering your answers in the tabs below. General Journal Use those calculated values to prepare your journal entries. View transaction list Journal entry worksheet 1 2 3 4 Accepted a $15,000, 180-day, 5% note from Vitalo in granting a time extension on her past-due account receivable.arrow_forwardFollowing are transactions for Vitalo Company. November 1 Accepted a $11,000, 180-day, 7 % note from Kelly White in granting a time extension on her past-due account receivable. December 31 Adjusted the year-end accounts for the accrued interest earned on the White note. April 30 White honored her note when presented for payment. Complete the table to calculate the interest amounts at December 31st and April 30th and use those calculated values to prepare your journal entries. (Do not round intermediate calculations. Use 360 days a year.) Complete this question by entering your answers in the tabs below. General Journal Complete the table to calculate the interest amounts at December 31st and April 30th November 1 Through December 31 Interest Amounts Principal Rate (%) Time Total interest Total Through Maturity January 1 Through April 30arrow_forward
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