YOUR NAME
ACCT-2150 Spring 2023
Week 13 Assignment: Chapter 12
12-1
On June 1, Padillio Pasta borrows $80,000 from First Bank on a six-month,
$80,000, 12 percent note.
Instructions
(a) Prepare the entry on June 1.
June 1
Cash
Notes Payable
(b) Prepare the adjusting entry on June 30.
June 30
Interest Expense
Interest Payable
(800 *12%) * 1/12
(c) Prepare the entry at maturity (December 1), assuming monthly adjusting entries have
been made through November 30.
December 1
Notes Payable
Interest Payable
(80,000 *12%) * 6/12
Cash
(d) What was the total financing cost (interest expense)?
12-2 In providing accounting services to small businesses, you encounter the following
situations pertaining to cash sales:
(a) Sue Jackson Company rings up sales and sales taxes separately on its cash register. On
April 10, the register totals are sales $30,000 and sales taxes $2,000.
(b) Person Company does not segregate sales and sales taxes. Its register total for April 15
is $28,800, which includes an 8 percent sales tax.
Instructions
Prepare the entry to record the sales transactions and related taxes for each client
Sue Jackson Company
April 10
Cash
Sales
Sales Tax Payable
Person Company
10
12-3
Cash
Sales
Sales Tax Payable (28,000 – 25,926)
Presented here are two independent situations.
(a) On January 6, Bennett Catering sells food and services on account to Jackie, Inc., for
$7,000, terms 2/10, n/30. On January 16, Jackie, Inc., pays the amount due. Prepare the
entries on Bennett’s books to record the sale and related collection.
Jan
6
Accounts Receivable Jackie Inc
Sales Revenue
16
Cash ($7,000 – $140)
Sales Discount (2%* $7,000)
Accounts Receivable Jackie Inc
(b) On January 10, Erin Bybee uses her Sheridan Co. credit card to purchase kitchen supplies from Sheridan Co. for $9,000. On Febuary 10, Bybee is billed for the amount due of
$9,000. On February 12, Bybee pays $6,000 on the balance due. On March 10, Bybee is
billed for the amount due, including interest at 2 percent per month on the unpaid
balance as of February 12. Prepare the entries on Sheridan Co.’s books related to the
trans- actions that occurred on January 10, February 12, and March 10.
Jan
10
Accounts Receivable E. Bybee
Sales Revenue
Feb.
12
Cash
Accounts Receivable E. Bybee
Mar
10
Accounts Receivable E. Bybee
Interest Revenue [2% *($9,000 – $6,000)]
12-4 The ledger of Elburn Grill at the end of the current years shows Accounts
Receivable $110,000; Sales $840,000; and Sales Returns and Allowances $28,000.
Instructions
(a) If Elburn uses the direct write-off method to account for uncollectible accounts,
journalize the adjusting entry at December 31, assuming Elburn determines that Copp’s
$1,400 balance is uncollectible.
Dec
31
Bad Debts Expense
Accounts Receivable Copp
(b) If Allowance for Doubtful Accounts has a credit balance of $2,100 in the trial balance,
journalize the adjusting entry at December 31, assuming bad debts are expected to be
(1) 1 percent of net sales and (2) 10 percent of accounts receivable.
Dec
31
Bad Debts Expense [($840,000 – $28,000) * 1%]
Allowance for Doubtful Accounts
Dec 31 Bad Debts Expense
Allowance for Doubtful Accounts [($110,000 *10%) – $2.100]
(c) If Allowance for Doubtful Accounts has a debit balance of $200 in the trail balance,
journalize the adjusting entry at December 31, assuming bad debts are expected to be (1)
0.75 percent of net sales and (2) 6 percent of accounts receivable.
Dec
31
Bad Debts Expense [($840,000 – $28,000) * .75%]
Allowance for Doubtful Accounts
Dec 31 Bad Debts Expense
Allowance for Doubtful Accounts [($110,000 *6%) + $200]
12-5 Leland Hotels has accounts receivable of $98,100 at March 31. An analysis of the
accounts shows the following:
Month of Sale
Balance, March 31
$65,000
17,600
8,500
7,000
$98,100
March
February
January
Prior to January
Credit terms are 2/10, n/30. On March 31, Allowance for Doubtful Accounts has a credit
balance of $1,200 prior to adjustment. The company uses the percentage of receivables
basis for estimating uncollectible accounts. The company’s estimate of bad debts is as
follows:
Estimated Percentage
Uncollectible
2%
5%
30%
50%
Age if Accounts
1-30 days
30-60 days
60-90 days
Over 90 days
Instructions
(a) Determine the total estimated uncollectibles.
Age if Accounts
Amount
1-30 days
30-60 days
60-90 days
Over 90 days
%
Estimated
Uncollectible
2%
5%
30%
50%
(b) Prepare the adjusting entry at March 31 to record bad debts expense.
Date
Mar 31
Account
Debit
Credit
Bad Debts Expense [8230 – 1200]
Allowance for Uncollectible Accounts
(To record bad debts expense)
12-6 On December 31, 2008, Crawford Resorts estimated that 1.5 percent of its net sales
of $400,000 would become uncollectible. The company recorded this amount as an addition
to Allowance for Doubtful Accounts. On May 11, 2009, Crawford Co. determined that
Kevin Hayes’s account was uncollectible and wrote off $1,100. On June 12, 2009, Hayes
paid the amount previously written off.
Instructions
(a) Prepare the journal entries on December 31, 2008; May 11, 2009; and June 12, 2009.
December 31, 2008
Dec 31
Bad Debts Expense [1.5% * $400,000]
Allowance for Uncollectible Accounts
May 11, 2009
May 11
Allowance for Doubtful Accounts
Accounts Receivable Hayes
June 12, 2009
Jun 12
Accounts Receivable Hayes
Allowance for Doubtful Accounts
Cash
Accounts Receivable Hays
12-7
Presented here are two independent situations.
(a) On March 3, Hinckley Appliances sells $580,000 of its receivables to Marsh Factors,
Inc. Marsh Factors assesses a finance charge of 3 percent of the amount of receivables
sold. Prepare the entry on Hinckley Appliances’ books to record the sale of the
receivables
Mar 3
Cash
Service Charge Expense
Accounts Receivable
(b) On May 10, Cody Company sold merchandise for $3,800 and accepted the customer’s
Allstar Bank MasterCard. At the end of the day, the Allstar Bank MasterCard
receipts were deposited in the company’s bank account. Allstar Bank charges a 4
percent service charge for credit-card sales. Prepare the entry on Cody Company’s
books to record the sale of merchandise.
May 10
Cash
Service Charge Expense
Sales
12-8 Presented here are two independent situations.
a) On April 2, Julie Keiser uses her KitchenMart Company credit card to purchase
kitchen supply from a KitchenMart store for $1,800. On May 1, Keiser is billed for
the $1,800 amount due. Keiser pays $700 on the balance due on May 3. On June 1,
Keiser receives a bill for the amount due, including interest at 1 percent per month
on the unpaid balance as of May 3. Prepare the entries on KitchenMart books related
to the transactions that occurred on April 2, May 3, and June 1.
Apr 2
Accounts Receivable Keiser
Sales
May 3
Cash
Accounts Receivable Keiser
Jun 1
Accounts Receivable Keiser
Interest Revenue [($1,800 – $700) * 1%]
b) On July 4, Newark’s Restaurant accepts an American Express card for a $350 dinner
bill. American Express charges a 4 percent service fee. On July 10, American Express
pays Newark $336. Prepare the entries on Newark’s books related to the transactions
Jul 4
Accounts Receivable American Express
Service Charge Expense
Sales
10
Cash
Accounts Receivable American Express
12-9 Mexico Timeshare, Inc., has the following transactions related to notes receivable
during the last two months of 2008:
Nov
1
Loaned $18,000 cash to Norma Hanson on a one-year, 10 percent note.
Dec
11 Sold goods to John Countryman, Inc., receiving a $6,750, ninety-day, 8
percent note
16 Received a $4,000, six-month, 9 percent note in exchange for Bob Shabo’s
outstanding accounts receivable.
31 Accrued interest revenue on all notes receivable
Instructions
(a) Journalize the transactions for Mexico Timeshare, Inc.
Mexico Timeshare 2008
Nov 1 Notes Receivable
Cash
Dec 11 Notes Receivable
Sales
16 Notes Receivable
Accounts Receivable
31 Interest Receivable
Interest Revenue
(c) Record the collection of the Hanson note at its maturity in 2009
Hanson Note 2009
Nov 1
Cash
Interest Receivable
Interest Revenue
(18,000 * 10% * 10/12)
Notes Receivable
Journalize entries for notes receivable.
12-10 Record the following transactions for Sandwich, Co., in the general journal:
2006
May 1
Dec.
Dec.
31
31
2007
May 1
Sandwich Co
Received an $8,700, one-year, 10 percent note in exchange for
Linda Anderson’s out- standing accounts receivable.
Accrued interest on the Anderson note.
Closed the interest revenue account.
Received principal plus interest on the Anderson note.
(No interest has been accrued in 2009.)
2006
May 1 Notes Receivable
Accounts Receivable Anderson
Dec 31 Interest Receivable
Interest Revenue ($8,700 * 10% * 8.5)
31 Interest Revenue
Income Summary
Sandwich Co
2007
May 1 Cash
Notes Receivable
Interest Receivable
Interest Revenue
($8,700 * 10% * 4/12)
12-11 At December 31, 2008, Sycamore International Foods reported the following
information on its balance sheet:
Accounts receivable
Less: Allowance for doubtful accounts
$1,020,000
60,000
During 2009, the company had the following transactions related to receivables:
1. Sales on account
$2,670,000
2. Sales returns and allowances
40,000
3. Collections of accounts receivable
2,300,000
4. Write-offs of accounts receivable deemed uncollectible
65,000
5. Recovery of bad debts previously written off as uncollectible.
20,000
Instructions
(a) Prepare the journal entries to record each of these five transactions. Assume that no
cash discounts were taken on the collections of accounts receivable.
1 Accounts Receivable
Sales
2 Sales Returns and Allowances
Accounts Receivable
3 Cash
Accounts Receivable
4 Allowance for Doubtful Accounts
Accounts Receivable
5 Accounts Receivable
Allowance for Doubtful Accounts
Cash
Accounts Receivable
(b) Enter the January 1, 2009, balances in Accounts Receivable and Allowance for Doubtful Accounts. Post the entries to the two accounts (use T accounts), and determine the
balances.
Accounts Receivable
Bal
(2)
(1)
(3)
(5)
(4)
Allowance for Doubtful Accounts
(4)
Bal
(5)
(5)
Bal
Bal
(c) Prepare the journal entry to record bad debts expense for 2009, assuming that an aging
of accounts receivable indicates that estimated bad debts are $95,000.
Balance before adjustment
Balance needed
Adjustment required
Journal Entry:
Bad Debts Expense
Allowance for Doubtful Accounts
(d) Compute the accounts receivable turnover ratio for the year 2009.
12-12 Brantley Food Supply Co. has the following transactions related to notes receivable
during the last two months of the year:
Nov
1
Loaned $15,000 cash to Bayou Bend Restaurant on a one-year, 12 percent note.
Dec
11
Sold goods to Walker BBQ receiving a $8,000, ninety-day, 12 percent note
16
Received a $5,000, 180-day, 10 percent note on account from Jane’s Bakery.
31
Accrued interest revenue on all notes receivable.
Instructions
Journalize the transactions for Brantley Food Supply Co.
Nov
1
Notes Receivable
Cash
Dec
11
Notes Receivable
Sales
16
Notes Receivable
31
Interest Receivable
Interest Revenue
Bayou Bend:
Walker:
Jane:
Total Interest:
12-13 Record the following transactions for Amy Ice Co. in the general journal:
2008
May 1
Dec.
31
Received a $12,000, one-year, 10 percent note on account from
Rosa’s Hamburger.
Accrued interest on the note.
Dec.
31
2009
May 1
Amy Ice Co
Closed the interest revenue account.
Received principal plus interest on the note.
(No interest has been accrued in 2009.)
2008
May 1 Notes Receivable
Accounts Receivable Pauls
Dec 31 Interest Receivable
Interest Revenue ($12,000 * 10% * 8/12)
31 Interest Revenue
Income Summary
Amy Ice Co
2009
May 1 Cash
Notes Receivable
Interest Receivable
Interest Revenue
($12,000 * 10% * 4/12)
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