Chamberlain Enterprises Inc. reported the following receivablesin its December 31, 2016, year-end balance sheet:
Current assets: Accounts receivable, net of $28,000 inallowance for
uncollectible accounts $ 238,000 Interest receivable 10,700 Notes receivable 300,000
Additional Information:
1. The notes receivable account consists of two notes, a $65,000note and a $235,000 note. The $65,000 note is dated October 31,2016, with principal and interest payable on October 31, 2017. The$235,000 note is dated June 30, 2016, with principal and 8%interest payable on June 30, 2017.
2. During 2017, sales revenue totaled $1,380,000, $1,300,000 cashwas collected from customers, and $26,000 in accounts receivablewere written off. All sales are made on a credit basis. Bad debtexpense is recorded at year-end by adjusting the allowance accountto an amount equal to 10% of year-end accounts receivable.
3. On March 31, 2017, the $235,000 note receivable was discountedat the Bank of Commerce. The bank's discount rate is 10%.Chamberlain accounts for the discounting as a sale.
Required:
1. Not including sales revenue, what revenue and expense amountsrelated to receivables will appear in Chamberlainâs 2017 incomestatement?
2. What amounts will appear in the 2017 year-end balance sheetfor accounts receivable (net)
3. Calculate the receivables turnover ratio for 2017.(Round your answer to 1 decimal place.)
Chamberlain Enterprises Inc. reported the following receivablesin its December 31, 2016, year-end balance sheet:
| Current assets: | |||
| Accounts receivable, net of $28,000 inallowance for uncollectible accounts | $ | 238,000 | |
| Interest receivable | 10,700 | ||
| Notes receivable | 300,000 | ||
| Additional Information: |
| 1. | The notes receivable account consists of two notes, a $65,000note and a $235,000 note. The $65,000 note is dated October 31,2016, with principal and interest payable on October 31, 2017. The$235,000 note is dated June 30, 2016, with principal and 8%interest payable on June 30, 2017. |
| 2. | During 2017, sales revenue totaled $1,380,000, $1,300,000 cashwas collected from customers, and $26,000 in accounts receivablewere written off. All sales are made on a credit basis. Bad debtexpense is recorded at year-end by adjusting the allowance accountto an amount equal to 10% of year-end accounts receivable. |
| 3. | On March 31, 2017, the $235,000 note receivable was discountedat the Bank of Commerce. The bank's discount rate is 10%.Chamberlain accounts for the discounting as a sale.
|
Related questions
Problem 9-5A Analyzing and journalizing notes receivable transactions LO C2, C3, P4
The following selected transactions are from Ohlm Company. (Use 360 days a year.)
2016
| Dec. | 16 | Accepted a $10,200, 60-day, 7% note dated this day in granting Danny Todd a time extension on his past-due account receivable. | ||
| 31 | Made an adjusting entry to record the accrued interest on the Todd note. |
2017
| Feb. | 14 | Received Toddâs payment of principal and interest on the note dated December 16. | ||
| Mar. | 2 | Accepted a(n) $7,700, 7%, 90-day note dated this day in granting a time extension on the past-due account receivable from Midnight Co. | ||
| 17 | Accepted a(n) $2,100, 30-day, 7% note dated this day in granting Ava Privet a time extension on her past-due account receivable. | |||
| Apr. | 16 | Privet dishonored her note when presented for payment. | ||
| May | 31 | Midnight Co. refused to pay the note that was due to Ohlm Co. on May 31. Prepare the journal entry to charge the dishonored note plus accrued interest to Midnight Co.'s accounts receivable. | ||
| July | 16 | Received payment from Midnight Co. for the maturity value of its dishonored note plus interest for 46 days beyond maturity at 7%. | ||
| Aug. | 7 | Accepted a(n) $7,700, 90-day, 12% note dated this day in granting a time extension on the past-due account receivable of Mulan Co. | ||
| Sep. | 3 | Accepted a(n) $2,350, 60-day, 9% note dated this day in granting Noah Carson a time extension on his past-due account receivable. | ||
| Nov. | 2 | Received payment of principal plus interest from Carson for the September 3 note. | ||
| Nov. | 5 | Received payment of principal plus interest from Mulan for the August 7 note. | ||
| Dec. | 1 | Wrote off the Privet account against the Allowance for Doubtful Accounts. |
Required:
1-a. First, complete the table below to calculate the interest amount at December 31, 2016.
1-b. Use the calculated value to prepare your journal entries for 2016 transactions.
1-c. First, complete the table below to calculate the interest amounts.
1-d. Use those calculated values to prepare your journal entries for 2017 transactions.
Required 1A
First, complete the table below to calculate the interest amount at December 31, 2016.
|
Required 1B
Use the calculated value to prepare your journal entries for 2016 transactions.
Journal entry worksheet
Accepted a $10,200, 60-day, 7% note dated this day in granting Danny Todd a time extension on his past-due account receivable.
Note: Enter debits before credits.
Made an adjusting entry to record the accrued interest on the Todd note.
Required 1C
First, complete the table below to calculate the interest amounts.
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Required 1D
Use those calculated values to prepare your journal entries for 2017 transactions.
Journal entry worksheet
.....
1. Received Toddâs payment of principal and interest on the note dated December 16.
2. Accepted a $7,700, 7%, 90-day note dated this day in granting a time extension on the past-due account receivable from Midnight Co.
3. Accepted a $2,100, 30-day, 7% note dated this day in granting Ava Privet a time extension on her past-due account receivable.
4. Privet dishonored her note when presented for payment.
5. Midnight Co. refused to pay the note that was due to Ohlm Co. on May 31. Prepare the journal entry to charge the dishonored note plus accrued interest to Midnight Co.âs accounts receivable.
6. Received payment from Midnight Co. for the maturity value of its dishonored note plus interest for 46 days beyond maturity at 7%.
7. Accepted a $7,700, 90-day, 12% note dated this day in granting a time extension on the past-due account receivable of Mulan Co.
8. Accepted a $2,350, 60-day, 9% note dated this day in granting Noah Carson a time extension on his past-due account receivable.
9. Received payment of principal plus interest from Carson for the September 3 note.
10. Received payment of principal plus interest from Mulan for the August 7 note.
11. Wrote off the Privet account against Allowance for Doubtful Accounts.
Entries for Bonds Payable and Installment Note Transactions
The following transactions were completed by Hobson Inc., whosefiscal year is the calendar year:
| 2016 | |
| July 1. | Issued $4,370,000 of five-year, 8% callable bonds dated July 1,2016, at a market (effective) rate of 9%, receiving cash of$4,197,109. Interest is payable semiannually on December 31 andJune 30. |
| Oct. 1. | Borrowed $170,000 as a 10-year, 8% installment note from MarbleBank. The note requires annual payments of $25,335, with the firstpayment occurring on September 30, 2017. |
| Dec. 31. | Accrued $3,400 of interest on the installment note. Theinterest is payable on the date of the next installment notepayment. |
| Dec. 31. | Paid the semiannual interest on the bonds. The bond discountamortization of $17,289 is combined with the semiannual interestpayment. |
| Dec. 31. | Closed the interest expense account. |
| 2017 | |
| June 30. | Paid the semiannual interest on the bonds. The bond discountamortization of $17,289 is combined with the semiannual interestpayment. |
| Sept. 30. | Paid the annual payment on the note, which consisted ofinterest of $13,600 and principal of $11,735. |
| Dec. 31. | Accrued $3,165 of interest on the installment note. Theinterest is payable on the date of the next installment notepayment. |
| Dec. 31. | Paid the semiannual interest on the bonds. The bond discountamortization of $17,289 is combined with the semiannual interestpayment. |
| Dec. 31. | Closed the interest expense account. |
| 2018 | |
| June 30. | Recorded the redemption of the bonds, which were called at 98.The balance in the bond discount account is $103,735 after paymentof interest and amortization of discount have been recorded.(Record the redemption only.) |
| Sept. 30. | Paid the second annual payment on the note, which consisted ofinterest of $12,661 and principal of $12,674. |
Required:
1. Journalize the entries to record theforegoing transactions. For compound transactions, if an amount boxdoes not require an entry, leave it blank or enter "0". Whenrequired, round your answers to the nearest dollar.
| Date | Account | Debit | Credit |
|---|---|---|---|
| 2016 | |||
| July 1 | Cash | ||
| Discount on bonds payable | |||
| Bonds payable | |||
| Oct. 1 | Cash | ||
| Notespayable | |||
| Dec. 31-Note | Interest expense | ||
| Notespayable | |||
| Dec. 31-Bond | Cash | ||
| Interest expense | |||
| Gain on bonds payable | |||
| Dec. 31-Closing | Bonds payable | ||
| Discount onbonds payable | |||
| 2017 | |||
| June 30 | Cash | ||
| Discount on bonds payable | |||
| Interest expense | |||
| Sept. 30 | Interest expense | ||
| Notes payable | |||
| Cash | |||
| Dec. 31-Note | |||
| Dec. 31-Bond | Notes payable | ||
| Interest expense | |||
| Cash | |||
| Dec. 31-Closing | Discount on bonds payable | ||
| Bondspayable | |||
| 2018 | |||
| June 30 | Bonds payable | ||
| Cash | |||
| Gain on redemption of bonds | |||
| Sept. 30 | |||
| Notes payable | |||
2. Indicate the amount of the interest expensein (a) 2016 and (b) 2017.
a. 2016 $
b. 2017 $
3. Determine the carrying amount of the bondsas of December 31, 2017.
$
| Following are selected transactions Deshawn Company for 2010 and2011. |
| 2010 |
| Dec. | 13 | Accepted a$27,000, 45-day, 10% note dated December 13 in granting LatishaClark a time extension on her past-due account receivable. |
| 31 | Prepared anadjusting entry to record the accrued interest on the Clarknote. |
| 2011 |
| Jan. | 27 | ReceivedClark%u2019s payment for principal and interest on the note datedDecember 13. |
| Mar. | 3 | Accepted a$21,000, 7%, 90-day note dated March 3 in granting a time extensionon the pastdue account receivable of Shandi Company. |
| 17 | Accepted a$19,000, 30-day, 9% note dated March 17 in granting Juan Torres atime extension on his past-due account receivable. | |
| Apr. | 16 | Torres dishonorshis note when presented for payment. |
| May | 1 | Wrote off theTorres account against the Allowance for Doubtful Accounts. |
| June | 1 | Received theShandi payment for principal and interest on the note dated March3. |
Prepare journalentries for the above transactions for 2011. (Use 360 days a year. Do not round intermediate calculations andround your final answers to nearest dollar amount. Omit the "$"sign in your response.) |
| Date | General Journal | Debit | Credit | |
| 2011 | ||||
| Jan. | 27 | (Click to select)CashNotes receivable-L. ClarkBad debtsexpenseMerchandise inventoryInterest receivableInterest revenueCostof goods soldPrepaid insurance | ||
| (Click to select)Notesreceivable-L. ClarkCashInterest revenueBad debts expenseCost ofgoods soldPrepaid insuranceMerchandise inventoryInterestreceivable | ||||
| (Click to select)InterestreceivableCost of goods soldBad debts expenseMerchandiseinventoryInterest revenueNotes receivable-L. ClarkCashPrepaidinsurance | ||||
| (Click to select)PrepaidinsuranceMerchandise inventoryCost of goods soldInterestrevenueInterest receivableNotes receivable-L. ClarkBad debtsexpenseCash | ||||
| Mar. | 3 | (Click to select)Accounts receivable-Shandi CoNotespayable-Shandi CoMerchandise inventoryNotes receivable-ShandiCoCashStore suppliesCost of goods soldPrepaid insurance | ||
| (Click to select)StoresuppliesNotes receivable-Shandi CoCashNotes payable-ShandiCoPrepaid insuranceMerchandise inventoryCost of goods soldAccountsreceivable-Shandi Co | ||||
| 17 | (Click to select)CashPrepaid insuranceNotes payable-J.TorresAccounts receivable-J. TorresInterest receivableMerchandiseinventoryCost of goods soldNotes receivable-J. Torres | |||
| (Click to select)InterestreceivableCashMerchandise inventoryAccounts receivable-J.TorresNotes receivable-J. TorresPrepaid insuranceNotes payable-J.TorresCost of goods sold | ||||
| Apr. | 16 | (Click to select)Notes receivable-J. TorresAllowancefor doubtful accountsInterest receivableCashAccounts receivable-J.TorresCost of goods soldInterest revenueBad debts expense | ||
| (Click to select)Cost ofgoods soldCashInterest revenueAllowance for doubtful accountsBaddebts expenseAccounts receivable-J. TorresInterest receivableNotesreceivable-J. Torres | ||||
| (Click to select)Notesreceivable-J. TorresCashBad debts expenseInterestreceivableInterest revenueCost of goods soldAccounts receivable-J.TorresAllowance for doubtful accounts | ||||
| May | 1 | (Click to select)Bad debts expenseSales expense andallowancePrepaid insuranceCashAccounts receivable-J.TorresAllowance for doubtful accountsInterest revenueInterestreceivable | ||
| (Click to select)Accountsreceivable-J. TorresAllowance for doubtful accountsSales expenseand allowanceInterest receivableBad debts expensePrepaidinsuranceInterest revenueCash | ||||
| June | 1 | (Click to select)Notes receivable-Shandi CoSalesexpense and allowancesCashCost of goods soldInterest revenueBaddebts expenseMerchandise inventorySupplies expense | ||
| (Click to select)Notesreceivable-Shandi CoInterest revenueCashMerchandise inventoryCostof goods soldBad debts expenseSupplies expenseSales expense andallowance | ||||
| (Click to select)Notesreceivable-Shandi CoInterest revenueCashSales expense andallowanceSupplies expenseBad debts expenseCost of goodssoldMerchandise inventory | ||||
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