Accounting Al Example no 1: On January 1, 2012, DeCarlo Company had Accounts Rec

Question

Accounting Al Example no 1: On January 1, 2012, DeCarlo Company had Accounts Receivable $98,000 and Allowance for Doubtful Accounts $8,100. DeCarlo Company prepares financial statements annually. During the year, the following selected transactions occurred Jan. 5 Sold $10,800 of merchandise to Kelly Company, terms 2/15, n/30. Feb. 2 Accepted a $10,800, 4-month, 10% promissory note from Kelly Company for the balance due Sold S13,500 of merchandise to Raymond Company and accepted Raymond's $13,500, 2-month, 10% note for the balance due. 12 26 Sold $7,000 of merchandise to Ringspin Co,.terms n/10 5 Accepted a $7,000, 3-month, 8% note from Ringspin Co. for the balance due. Collected Raymond Company note in full. Apr. June 2 Collected Kelly Company note in full. July 5 Ringspin Co. dishonors its note of April 5. It is expected that 15 Sold $12,000 of merchandise to Butter Co. and accepted Butter's 15 Butter Co.'s note was dishonored. Butter Co. is bankrupt, and there Ringspin will eventually pay the amount owed. $12,000, 3-month, 12% note for the amount due. is no hope of future settlement. Oct. Instructions (a) Journalize the transactions. b) Enter the beginning balances in the ledger accounts and post the January transactions. (e) Prepare a balance sheet and income statement on October 31, 2012. Example no 2:

Explanation / Answer

a) Journal Entries :

b) Ledger accounts :

(c) Abstract of Income Statement and balance sheet on Oct 31, 2012 :

Income Statement account:

Balance Sheet :

Date Accounts Titles and description Debit $ Credit $ Jan 5 AR 10800 Sales 10800 Feb 2 Note Receivable - Kelly 10800 AR 10800 Feb 12 Note Receivable-Reymond 13500 Sales 13500 Feb 26 AR 7000 Sales 7000 Apr 5 Note Receivable- Ringspin 7000 AR 7000 Apr 12 Cash 13725 Note Receivable - Reymond 13500 Interest revenue 225 (13500+13500*10%*2/12=13725) Jun 2 Cash 11160 Note Receivable - Kelly 10800 Interest revenue 360 (10800+10800*10%*4/12=11160) July 5 AR 7140 Note Receivable - Ringspin 7000 Interest revenue 140 (7000+7000*8%*3/12=7140) July 15 Note Receivable - Butter 12000 Sales 12000 Oct 15 AR 12360 Note Receivable - Butter 12000 Interest revenue 360 (12000+12000*12%*3/12=12360) Oct 15 Allowance for Doubtful Debts 8100 Bad Debts 4260 AR 12360 (being butter dues written off)

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