Weldon Corporation’s fiscal year ends December 31. The following is a list of tr
ID: 2575696 • Letter: W
Question
Weldon Corporation’s fiscal year ends December 31. The following is a list of transactions involving receivables that occurred during 2018:
There are nine entries.
Mar. 17 Accounts receivable of $3,700 were written off as uncollectible. The company uses the allowance method. 30 Loaned an officer of the company $45,000 and received a note requiring principal and interest at 8% to be paid on March 30, 2019. May 30 Discounted the $45,000 note at a local bank. The bank’s discount rate is 9%. The note was discounted without recourse and the sale criteria are met. June 30 Sold merchandise to the Blankenship Company for $32,000. 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. 31 Sold stock in a nonpublic company with a book value of $7,000 and accepted a $8,200 noninterest-bearing note with a discount rate of 9%. The $8,200 payment is due on February 28, 2019. The stock has no ready market value. Dec. 31 Bad debt expense is estimated to be 1% of credit sales for the year. Credit sales for 2018 were $900,000.Explanation / Answer
Journal entries of Weldon corporations fiscal year December 31
date
particulars
Debit
credit
Mar-17
allowances for uncollectible accounts
$3,700
accounts receivable
$3,700
Mar-30
note receivable
$45,000
cash
$45,000
May-30
interest receivable
$675
interest revenue
$675
May-30
cash
$44528
loss on sale of note receivables
$1147
interest receivable
$675
note receivable
$45,000
Jun-30
account receivable
$32,000
sales revenue
$32,000
Jul-08
cash(32,000*98%)
$31,360
sales discount(32,000*2%)
$640
account receivable
$32,000
dec 31
bad debt expenses(900,000*1%)
$9,000
allowances for uncontrollable accounts
$9,000
August 31 = Notes receivable (face amount) $8,200
Discount on note receivable 680
Investment (book value) $7000
Gain on sale of investment (difference) 520
PV(FV=$8,200,pmt=0,n=6/12,i=9%)=7520
Adjustment entries
To accrue interest earned on note receivable from loan to officer
Interest receivable $2,700
Interest receivable ($45000*8%*9/12) $2,700
To accrue interest earned on note receivable from sale of stock
Discount on note receivable 225
Interest revenue($7520*9%*4/12) 225
date
particulars
Debit
credit
Mar-17
allowances for uncollectible accounts
$3,700
accounts receivable
$3,700
Mar-30
note receivable
$45,000
cash
$45,000
May-30
interest receivable
$675
interest revenue
$675
May-30
cash
$44528
loss on sale of note receivables
$1147
interest receivable
$675
note receivable
$45,000
Jun-30
account receivable
$32,000
sales revenue
$32,000
Jul-08
cash(32,000*98%)
$31,360
sales discount(32,000*2%)
$640
account receivable
$32,000
dec 31
bad debt expenses(900,000*1%)
$9,000
allowances for uncontrollable accounts
$9,000
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