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Lancaster, Inc., began business on January 1. Certain transactions for the year

ID: 2561855 • Letter: L

Question

Lancaster, Inc., began business on January 1. Certain transactions for the year follow: Jun.8 Received a $20,000, 60 day, six percent note on account from R. Elliot. Aug.7 Received payment from R. Elliot on her note (principal plus interest). Sep. Received an $18,000, 120 day, seven percent note from B. Shore Company on account. Dec.16 Received a $14,400, 45 day, ten percent note from C. Judd on account. Dec.30 B. Shore Company failed to pay its note Dec.31 Wrote off B. Shore's account as uncollectible. Lancaster, Inc. uses the allowance method of providing for credit losses. Recorded expected credit losses for the year by an adjusting entry. Accounts written off during this first year have created a debit balance in the Allowance for Doubtful Accounts of $24,500. An analysis of aged receivables indicates that the desired balance of the allowance account should be $21,300. Dec.31 Dec.31 Made the appropriate adjusting entries for interest. Required Record the foregoing transactions and adjustments in general journal form. (Round all interest income calculations to the nearest dollar.) General Journal Date Description Debit Credit Jun.8 Notes Receivable-R. Elliot 20,000 Accounts Receivable-R. Elliot 20,000 Received a 60-day, 6 percent note on account. Aug.7 Cash 20,200 0 Interest Income 0 200 Notes Receivable-R. Elliot 20,000 To record receipt of principal plus interest from R. Elliot. Sep. Notes Receivable-B. Shore Company 18,000 Accounts Receivable-B, Shore Company 18,000 Received a 120-day, 7 percent note on account.

Explanation / Answer

General Journal

Date Description Debit Credit

June 8 Notes Receivable---R Elliot 20,000

Accounts Receivable - - R Elliot 20,000

Received a 60 day note on account

Aug 7 Cash 20,200

Interest Income 200

Notes Receivable - - R Elliot 20,000

To Record receipt of principal plus interest from R Elliot

Sep 1 Notes Receivable - - B Shore Company 18,000

Accounts Receivable--B Shore Company 18,000

Received a 120 day, 7percent note on account

Dec 16 Notes Receivable - - C. Judd 14,400

Accounts Receivable - -C. Judd 14,400

Received a 45 day, 10 percent note on account

Dec 30 Accounts Receivable - - B Shore Company 18,420

Interest Income 420

Notes Receivable - - B Shore Company 18,000

To Record dishonor ingredients of B Shore Company's note

Dec 31 Allowance for Doubtful Accounts 18,420

Accounts Receivable - - B Shore Company 18,420

To write off B Shore's account

Dec 31 Bad debts expense 43,540

Allowance for Doubtful Accounts 43,540

To Record allowance for uncollectible debts

Dec 31 Notes Receivable - -C. Judd 60

Interest Income 60

To accrue interest income on Dec 16 note