Question

On July 9, 2018, Omar Co. purchased a machine for 260,000 SA from Saudi Machine Company (SMC). Omar gave SMC 7% note due in 120 days in payment for the machine. (5 Points)

What is the maturity date of the note?

How much interest will Omar pay to SMC on this note?

Pass the Journal entry for Notes Receivable transaction.

On October 16, 2018, Omar informs us that the company is unable to pay the note or interest?

What adjusting entry is required on December 2018?

On October 31, 2017, Aziz Company sells a truck that originally cost 140,000 SA for 95,000 SA cash. The truck was placed in service on January 1, 2012. It was depreciated using the straight-line method with an estimated salvage value of 28,000 and a useful life of 10 years. Record all the transactions? (2.5 points)

The trial balance before adjustment of XYZ Company reports the following balances: (2.5 points)

                                                                                        Dr.                  Cr.                                                                             

Accounts receivable                                                $100,000

Allowance for doubtful accounts                                             $    2,500

Sales (all on credit)                                                                    750,000

Sales returns and allowances                                       40,000

Instructions

            Pass the journal entries for estimated bad debts assuming that doubtful debts accounts are estimated to be

(1)       6% of gross accounts receivable and

(2)       1% of net sales.

Answer 1

Maturity date of Note is 6th Nov 2018 (9-7-2018 + 120 days)

Interest payable by Omar is 5983.56 {(260000*7%)*120/365}

Journal Entry for Notes Receivable on 9th July 2018-

Date Particulars Amount

Omar Co. A/c Dr 265983.56

To Sales A/c Cr 260000

To Interest Receivable A/c 5983.56

(Being notes receivable)

Adjustment Entry to be passed in Dec 2018-

Bad Debts A/c Dr 265983.56

To Omar Co A/c Cr 265983.56

(recognized as bad debts and reduce debtors)

Aziz Company Solution

Cash A/c Dr 95,000

Accumulated Depreciation A/c Dr 65,333

To Gain on Disposal A/c Cr 48,333

To Truck A/c Cr 1,12,000

(being gain realized on sale of truck)

XYZ Company Solution-

Allowance for Doubtful Accounts Dr 3500

To Accounts Receivable A/c Cr 3500

Allowance for Doubtful Accounts Dr 4600

To Accounts Receivable A/c Cr 4600