Question

Midtown Distribution sells a variety of merchandise to retail stores on account, but it insists that...

Midtown Distribution sells a variety of merchandise to retail stores on account, but it insists that any customer who fails to pay an invoice when due must replace their account receivable with an interest-bearing note. The company adjusts and closes its accounts at December 31. Among the transactions relating to notes receivable were the following.
Nov. 1 Received from a customer (Sampson Co.) a 9-month, 12 percent note for $30,000 in settlement of an account receivable due today.
Aug. 1 Collected in full the 9-month, 12 percent note receivable from Sampson Co., including interest.
Instructions
a. Prepare journal entries (in general journal form) to record: (1) the receipt of the note on November 1; (2) the adjustment for interest on December 31; and (3) the collection of principal and interest on August 1. (To better illustrate the allocation of interest revenue between accounting periods, we will assume Midtown makes adjusting entries only at year-end.)
b. Assume that instead of paying the note on August 1, the customer (Sampson Co.) had defaulted. Give the journal entry by Midtown to record the default. Assume that Sampson Co. has sufficient resources that the note eventually will be collected.

Homework Answers

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Sampson Co. sold merchandise to Batson Co. on account, $28,400, terms 2/15, net 45 on December...
Sampson Co. sold merchandise to Batson Co. on account, $28,400, terms 2/15, net 45 on December 26. The cost of the goods sold is $21,300. The Batson Co. paid the invoice on December 31, within the discount period. Assume both Sampson and Batson use a perpetual inventory system. Required: Prepare the entries that both Sampson and Batson Companies would record for the above. Refer to the Chart of Accounts for exact wording of account titles. If no entry is required,...
Brubacher Service Company sells for cash and on account. Buy selling on account, Brubacher cannot expect...
Brubacher Service Company sells for cash and on account. Buy selling on account, Brubacher cannot expect to collect 100% of its accounts receivable The following transactions took place for the year ended December 31, 2020: a. Issued invoices for service revenue on account totalling $670,000. b. Received collections from customers (relating the invoices on account) totalling $630,000. c. Wrote off specific customer accounts determined to be uncollectible totalling $30,000. d. Recovered a customer account, that had previously been written off,...
RecRoom Equipment Company received an $8,400, six-month, 5 percent note to settle an $8,400 unpaid balance...
RecRoom Equipment Company received an $8,400, six-month, 5 percent note to settle an $8,400 unpaid balance owed by a customer. The note is accepted by RecRoom on November 1, causing the company to increase its Notes Receivable and decrease its Accounts Receivable. RecRoom adjusts its records for interest earned to its December 31 year-end. RecRoom receives the interest on the note's maturity date. RecRoom receives the principal on the note's maturity date. Prepare journal entries to record the above transactions...
On December 1, 2018, Liang Chemical provides services to a customer for $83,000. In payment for...
On December 1, 2018, Liang Chemical provides services to a customer for $83,000. In payment for the services, the customer signs a three-year, 12% note. The face amount is due at the end of the third year, while annual interest is due each December 1. Required: 1. Record the acceptance of the note on December 1, 2018. 2. Record the interest collected on December 1 for 2019 and 2020, and the adjustment for interest revenue on December 31 for 2018,...
RecRoom Equipment Company received an $8,600, six-month, 6 percent note to settle an $8,600 unpaid balance...
RecRoom Equipment Company received an $8,600, six-month, 6 percent note to settle an $8,600 unpaid balance owed by a customer. a. The note is accepted by RecRoom on November 1, causing the company to increase its Notes Receivable and decrease its Accounts Receivable. b. RecRoom adjusts its records for interest earned to its December 31 year-end. c. RecRoom receives the interest on the note's maturity date. d. RecRoom receives the principal on the note's maturity date. Prepare journal entries to...
On December 1, 2017 Klein Company received a $12,000, 8%, 3-month note from Ann Howe in...
On December 1, 2017 Klein Company received a $12,000, 8%, 3-month note from Ann Howe in settlement of an account receivable due today. Instructions: 1.    Prepare journal entries in general journal of Klein Company to record: (1) the receipt of the note; (2)the adjustment for interest on December 31, 2017; (3) the collection of principal and interest on the due date 2.    Assume that, on the due date, Klein Company received notification from Ann Howe that she was unable to honor her...
young company sells products for $40,000 on august 1, 2017, accepting a 9-month, 9% interest note....
young company sells products for $40,000 on august 1, 2017, accepting a 9-month, 9% interest note. Young prepares its financial statements as of December 31,2017. prepare all journal entries for note receivable including the collection of the note
CP 9‐6 On November 1, 2019 Branch Corporation converted a $10,000 account payable owing to Tree...
CP 9‐6 On November 1, 2019 Branch Corporation converted a $10,000 account payable owing to Tree Corp. to a note payable bearing interest at 10% per year due on January 31, 2020. Required: 1. Record the November 1, 2019 transaction in the records of Branch. 2. Record the adjusting entry needed on December 31, 2019. 3. Record the journal entry for the January 31 payment. 4. Record the above journal entries in the records of Tree Corp. Provide descriptions for...
NEED PART B On January 1, 2017, Pina Co. borrowed and received $478,000 from a major...
NEED PART B On January 1, 2017, Pina Co. borrowed and received $478,000 from a major customer evidenced by a zero-interest-bearing note due in 3 years. As consideration for the zero-interest-bearing feature, Pina agrees to supply the customer’s inventory needs for the loan period at lower than the market price. The appropriate rate at which to impute interest is 10%. (a) Prepare the journal entry to record the initial transaction on January 1, 2017. (b) Prepare the journal entry to...
On August 2, Jun Co. receives a $7,400, 90-day, 13.5% note from customer Ryan Albany as...
On August 2, Jun Co. receives a $7,400, 90-day, 13.5% note from customer Ryan Albany as payment on his $7,400 account receivable. Prepare Jun's journal entry assuming the note is honored by the customer on October 31 of that same year. (Do not round intermediate calculations. Round your answers to nearest whole dollar value. Use 360 days a year.) Record cash received on note plus interest. Note: Enter debits before credits. Date General Journal Debit Credit Oct 31 Prepare journal...