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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

Sales and notes receivable transactions

The following were selected from among the transactions completed by Caldemeyer Co. during the current year. Caldemeyer Co. sells and installs home and business security systems.

Jan. 3. Loaned $18,000 cash to Trina Gelhaus, receiving a 90-day, 8% note.
Feb. 10. Sold merchandise on account to Bradford & Co., $24,000. The cost of the merchandise sold was $14,400.
13. Sold merchandise on account to Dry Creek Co., $60,000. The cost of merchandise sold was $54,000.
Mar. 12. Accepted a 60-day, 7% note for $24,000 from Bradford & Co. on account.
14. Accepted a 60-day, 9% note for $60,000 from Dry Creek Co. on account.
Apr. 3. Received the interest due from Trina Gelhaus and a new 120-day, 9% note as a renewal of the loan of January 3. (Record both the debit and the credit to the notes receivable account.)
May 11. Received from Bradford & Co. the amount due on the note of March 12.
13. Dry Creek Co. dishonored its note dated March 14.
July 12. Received from Dry Creek Co. the amount owed on the dishonored note, plus interest for 60 days at 12% computed on the maturity value of the note.
Aug. 1. Received from Trina Gelhaus the amount due on her note of April 3.
Oct. 5. Sold merchandise on account to Halloran Co., $13,500. The cost of the merchandise sold was $8,100.
15. Received from Halloran Co. the amount of the invoice of October 5.

Instructions

Journalize the entries to record the transactions.

To determine

Note receivable:

Note receivable refers to a written promise received by the creditor from the debtor in formal, for the amounts to be settled within a stipulated period of time. This written promise is issued by a debtor or borrower to the lender or creditor. Notes receivable is an asset of a business. Notes receivable often used for the credit periods of more than 60 days.

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.

Interest on note:

Interest on note is the amount charged on the principal value of note for the privilege of borrowing money. Interest is to be paid by the borrower and to be received by the lender.

To journalize: The entries to record the transactions.

Explanation

Journalize the entries to record the transactions.

Date Account Title and Explanation Debit ($) Credit ($)
January 3 Notes receivable 18,000  
      Cash   18,000
  (To record the loaned amount on note)    
 
February 10 Accounts receivable – Company B 24,000  
      Sales   24,000
  (To record the sales made on account)    
 
February 10 Cost of merchandise sold 14,400  
      Merchandise inventory   14,400
  (To record the cost of merchandise sold)    
 
February 13 Accounts receivable – Company DC 60,000  
      Sales   60,000
  (To record the sales made on account)    
 
February 13 Cost of merchandise sold 54,000  
      Merchandise inventory   54,000
  (To record the cost of merchandise sold)    
       
March 12 Notes receivable 24,000  
      Accounts receivable – Company B   24,000
  (To record the receipt of note on account)    
 
March 14 Notes receivable 60,000  
      Accounts receivable – Company DC   60,000
  (To record the receipt of note on account)    
 
April 3 Notes receivable 18,000  
  Cash 360  
      Notes receivable   18,000
      Interest revenue (1)   360
  (To record the amount of interest received and renewal of the loan of January 3 )    
 
May 11 Cash $24,280  
      Notes receivable   $24,000
      Interest revenue (2)   $280
  (To record the collection of cash on note of march 12)    
 
May 13 Accounts receivable – Company D $60,900  
      Notes receivable   $60,000
      Interest revenue (3)   $900
  (To record dishonored note dated March 14)    
 
July 12 Cash $62,118  
      Accounts receivable – Company DC   $60,900
      Interest revenue (4)   $1,218
  (To record collection of cash from the dishonored note from Company DC)    
 
August 1 Cash $18,540  
      Notes receivable   $18,000
      Interest revenue (5)   $540
  (To record collection of cash on note of August 3)    
       
October 5 Accounts receivable – Company H $13,500  
      Sales   $13,500
  (To record the sales made on account)    
       
October 5 Cost of merchandise sold $8,100  
      Merchandise inventory   $8,100
  (To record the cost of merchandise sold)    
 
October 15 Cash $13,500  
      Accounts receivable – Company H   $13,500
  (To record the collection of cash on account)    

Table (1)

Working note:

For April 3:

Calculate the amount of interest revenue...

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