Weldon Corporation’s fiscal year ends December 31. The following is a list of tr
ID: 2491539 • Letter: W
Question
Weldon Corporation’s fiscal year ends December 31. The following is a list of transactions involving receivables that occurred during 2013:
Accounts receivable of $2,700 were written off as uncollectible. The company uses the allowance method.
Loaned an officer of the company $50,000 and received a note requiring principal and interest at 9% to be paid on March 30, 2014.
Discounted the $50,000 note at a local bank. The bank’s discount rate is 12%. The note was discounted without recourse and the sale criteria are met.
Sold merchandise to the Blankenship Company for $22,000. Terms of the sale are 2/10, n/30. Weldon uses the gross method to account for cash discounts.
Sold stock in a nonpublic company with a book value of $6,000 and accepted a $8,000 non-interest-bearing note with a discount rate of 12%. The $8,000 payment is due on February 28, 2014. The stock has no ready market value.
Bad debt expense is estimated to be 3% of credit sales for the year. Credit sales for 2013 were $800,000.
Required:
Prepare journal entries for each of the above transactions. (If no entry is required for a particular transaction, select "No journal entry required" in the first account field.)
1. Accounts receivable of $2,700 were written off as uncollectible. The company uses the allowance method.
2. Loaned an officer of the company $50,000 and received a note requiring principal and interest at 9% to be paid on March 30, 2014.
3. Record the accrued interest revenue on the discounted note.
4. Record the cash received on the discounted note.
5. Sold merchandise to the Blankenship Company for $22,000. Terms of the sale are 2/10, n/30. Weldon uses the gross method to account for cash discounts.
6. The Blankenship Company paid its account in full.
7. Sold stock in a nonpublic company with a book value of $6,000 and accepted a $8,000 non-interest-bearing note with a discount rate of 12%%. The $8,000 payment is due on February 28, 2014. The stock has no ready market value.
8. Bad debt expense is estimated to be 3% of credit sales for the year. Credit sales for 2013 were $800,000.
2. Prepare any additional year-end adjusting entries indicated. (If no entry is required for a particular transaction, select "No journal entry required" in the first account field.)
1. Record accrual of interest earned on note receivable.
Mar. 17Accounts receivable of $2,700 were written off as uncollectible. The company uses the allowance method.
30Loaned an officer of the company $50,000 and received a note requiring principal and interest at 9% to be paid on March 30, 2014.
May 30Discounted the $50,000 note at a local bank. The bank’s discount rate is 12%. The note was discounted without recourse and the sale criteria are met.
June 30Sold merchandise to the Blankenship Company for $22,000. Terms of the sale are 2/10, n/30. Weldon uses the gross method to account for cash discounts.
July 8 The Blankenship Company paid its account in full. Aug. 31Sold stock in a nonpublic company with a book value of $6,000 and accepted a $8,000 non-interest-bearing note with a discount rate of 12%. The $8,000 payment is due on February 28, 2014. The stock has no ready market value.
Dec. 31Bad debt expense is estimated to be 3% of credit sales for the year. Credit sales for 2013 were $800,000.
Required:
1Prepare journal entries for each of the above transactions. (If no entry is required for a particular transaction, select "No journal entry required" in the first account field.)
1. Accounts receivable of $2,700 were written off as uncollectible. The company uses the allowance method.
2. Loaned an officer of the company $50,000 and received a note requiring principal and interest at 9% to be paid on March 30, 2014.
3. Record the accrued interest revenue on the discounted note.
4. Record the cash received on the discounted note.
5. Sold merchandise to the Blankenship Company for $22,000. Terms of the sale are 2/10, n/30. Weldon uses the gross method to account for cash discounts.
6. The Blankenship Company paid its account in full.
7. Sold stock in a nonpublic company with a book value of $6,000 and accepted a $8,000 non-interest-bearing note with a discount rate of 12%%. The $8,000 payment is due on February 28, 2014. The stock has no ready market value.
8. Bad debt expense is estimated to be 3% of credit sales for the year. Credit sales for 2013 were $800,000.
2. Prepare any additional year-end adjusting entries indicated. (If no entry is required for a particular transaction, select "No journal entry required" in the first account field.)
1. Record accrual of interest earned on note receivable.
Explanation / Answer
Solution.
Preparation of journal entries for each of the above transactions.
Date Particulars Debit Credit 17-Mar Allowance for uncollectible accounts 2,700.00 Accounts receivable 2,700.00 30-Mar Note receivable 50,000.00 Cash 50,000.00 May 30 Interest Receivable 3,375.00 Interest Revenue (50,000 x 9% x 9/12) 3,375.00 Cash 53,375.00 Note receivable 53,375.00 June 30 Accounts receivable 22,000.00 Sales revenue 22,000.00 8-Jul Cash (22,000 x 98%) 21,560.00 Sales discounts (22,000 x 2%) 440.00 Accounts receivable 22,000.00 Aug. 31 Notes receivable (face amount) 8,000.00 Discount on note receivable 453.00 Investments (book value) 6,000.00 Gain on sale of investments (difference) 1,547.00 PV(FV=8,000, pmt=0, n=6/12, i=12%) = 7,547 Dec. 31 Bad debt expense ($700,000 x 2%) 24,000.00 Allowance for uncollectible accounts 24,000.00Related Questions
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