Question

s 7. Journalize the following transactions completed by Crockett, Inc. The company uses the ation allowance method of accounting for uncollectible accounts receivable and perpetual inventory 02/01/16 Sold merchandise on account to Fullerton Co. for $8,000. The cost of the 03/15/16 04/09/16 05/14/16 merchandise sold was $4,500 Accepted a 60-day, 12% note for $8,000 from Fullerton Co. on account. Wrote off a $2,500 account from Perrin Co. as uncollectible Received the interest due from Fullerton Co. and a new 90-day, 14% note as a renewal of the loan. 06/13/16 Reinstated the account of Perrin Co., written off on April 9, and received $2,500 in full payment. Received from Fullerton Co. the amount due on its note of May 14. It is estimated that 3% of the credit sales of $1,375,000 for the year ended 08/12/16 12/31/16 December 31 will be uncollectible.

Answer 1

Journal Entries

Date Account title & Explanation Debit Credit

02/01/16 Accounts receivable    $8000 Cost of goods sold $4500

Sale Revenue $8000 Inventory $4500 (To record sale on account)

03/15/16 12% Note receivable $8000 Accounts receivable $8000 (To record acceptance of note receivable) 04/09/16 Allowance for doubtful accounts $2500 Accounts receivable $2500 (To record uncollectible accounts receivable) 05/14/16 Cash $160 14% note receivable $8000 Interest revenue $160 12% note receivable $8000 (To record interest and renewal of note receivable) 06/13/16 Accounts receivable $2500 Allowance for doubtful debt $2500 (To reinstate account)

Cash $2500 Accounts receivable $2500 (To record cash received from receivable) 08/12/16 Cash $8280 14% note receivable $8000 Interest Income $280 (To record cash received from note) 12/31/16 Bad debt expense $41250 Allowance for doubtful account $41250 (To create allowance for doubtful debt)

Note interest 8000*12%*60/360=$160

8000*14%*90/360=280