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AccountingIntermediate Accounting: Reporting And Analysis3rd Edition

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Chapter 6, Problem 12P
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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

Solutions

Chapter
Section
Problem 1GI
Problem 2GI
Problem 3GI
Problem 4GI
Problem 5GI
Problem 6GI
Problem 7GI
Problem 8GI
Problem 9GI
Problem 10GI
Problem 11GI
Problem 12GI
Problem 13GI
Problem 14GI
Problem 15GI
Problem 16GI
Problem 17GI
Problem 18GI
Problem 19GI
Problem 20GI
Problem 21GI
Problem 22GI
Problem 23GI
Problem 24GI
Problem 25GI
Problem 26GI
Problem 27GI
Problem 1MC
Problem 2MC
Problem 3MC
Problem 4MC
Problem 5MC
Problem 6MC
Problem 7MC
Problem 8MC
Problem 9MC
Problem 10MC
Problem 11MC
Problem 1RE
Problem 2RE
Problem 3RE
Problem 4RE
Problem 5RE
Problem 6RE
Problem 7RE
Problem 8RE
Problem 9RE
Problem 10RE
Problem 11RE
Problem 12RE
Problem 13RE
Problem 14RE
Problem 15RE
Problem 16RE
Problem 1E
Problem 2E
Problem 3E
Problem 4E
Problem 5E
Problem 6E
Problem 7E
Problem 8E
Problem 9E
Problem 10E
Problem 11E
Problem 12E
Problem 13E
Problem 14E
Problem 15E
Problem 16E
Problem 17E
Problem 18E
Problem 19E
Problem 20E
Problem 21E
Problem 22E
Problem 23E
Problem 24E
Problem 1P
Problem 2P
Problem 3P
Problem 4P
Problem 5P
Problem 6P
Problem 7P
Problem 8P
Problem 9P
Problem 10P
Problem 11P
Problem 12P
Problem 13P
Problem 14P
Problem 15P
Problem 16P
Problem 17P
Problem 18P
Problem 19P
Problem 1C
Problem 2C
Problem 3C
Problem 4C
Problem 5C
Problem 6C
Problem 7C
Problem 8C
Problem 9C
Problem 10C
Problem 12C
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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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Recording Note Transactions The following information is extracted from Tara Corporation’s accounting records:

Chapter 6, Problem 12P, Recording Note Transactions The following information is extracted from Tara Corporations accounting

Required:

Prepare journal entries to record the preceding information, assuming that Tara usually does not sell its notes. (Assume a 360-day year for the purposes of computing interest and round all calculations to the nearest penny.)

To determine

Prepare journal entry to record the given transactions by assuming that Company T usually does not sell its notes.

Explanation

Accounts receivable:

Accounts receivable refers to the amounts to be received within a short period from customers upon the sale of goods and services on account. In other words, accounts receivable are amounts customers owe to the business. Accounts receivable is an asset of a business.

Prepare journal entry to record the given transactions by assuming that Company T usually does not sell its notes.

DateAccount Titles and explanationDebit ($)Credit ($)
May 1Notes receivable 6,000 
      Accounts receivable 6,000
 (To record the notes received from the Customer L )  

Table (1)

DateAccount Titles and explanationDebit ($)Credit ($)
May 6Notes receivable 9,000 
      Accounts receivable 9,000
 (To record the notes received from the Customer G )  

Table (2)

DateAccount Title and ExplanationDebitCredit
May  11Cash [$6,001.47(8)+$8,913.79(8)+$9,700(7)] 24,615.26 
 Discount on notes payable (7)300.00 
 Loss on sale of receivables [$102.53+$208.71] 311.24 
      Note receivable 15,000.00
      Notes payable 10,000.00
      Interest income [$20(8)+$12.50(8)]  32.50
      Recourse liability  194.00
 (To record the loss on sale of receivables with recourse liability)  

Table (3)

DateAccount Titles and explanationDebit ($)Credit ($)
July 31Recourse liability 84.00 
      Gain from sale of notes 84.00
 (To record the note that is not been paid)  

Table (4)

DateAccount Titles and explanationDebit ($)Credit ($)
August 10Notes payable10,000.00 
      Cash 10,000.00
 (To record the interest collected on transfer of  accounts receivable)  

Table (5)

DateAccount Titles and explanationDebit ($)Credit ($)
August 10Interest expense300.00 
     Discount on notes payable  300.00
 (To record the interest paid)  

Table (6)

DateAccount Titles and explanationDebit ($)Credit ($)
September  4Recourse liability 84.00 
 Notes  receivable dishonored 84.00
      Cash [$9,000+$300+$10]   
 (To record the payment of amount that have been dishonored by the bank)  

Table (7)

DateAccount Titles and explanationDebit ($)Credit ($)
September  23Cash ($9,310+$56.89) 84.00 
      Interest income ($9,310×11%×20360)  84

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