Question

Use the perpetual investy system, and be. Round to the newest 19-5A and journblizing ewable The following transactions are from Oilm Company s end distincts to record and it applies the lone method P4 Year 1 Dec. 16 Accepted a $10,800, 60-day, 8% note in granding Danny Todd time extension account receivable. Made an adjusting entry to record the accrued interest on the Todd not 31 me extension on his past-due Year 2 Feb. 14 Mar. 2 Received Todd's payment of principal and interest on the note dated December Accepted a 56,100. 8. 90-da note in gunting a time extension on the past de 17 e past due account re- Apr. 16 May 31 Aug. 7 e extension on her past-due ceivable from Mid 90-day note in gu t on the note dated December 16 Accepted a $2.400, 30-day, 75 note in granting Ava Privet a time extension on her account receivable. Privet dishonored her note. Midnight Co. dishonored its note, Accepted a $7.440.90-day, 10% note in granting a time extension on the past due con ceivable of Mulan Co. Accepted a $2.100,60-day, 10 note in granting Noah Carson time extension on the past account receivable. Received payment of principal plus interest from Carson for the September 3 note Received payment of principal plus interest from Mulan for the Aug notes Wrote off the Privet account against the Allowance for Doubtful Accounts Sep. 3 Nov. 2 Nov. S Dee. Required 1. Prepare journal entries to record these transactions and events. Analysis Component 2. If Ohlm pledged its receivables as security for a loan from the bank, where on the financial statements does it disclose this pledge of receivables?

Answer 1

1. Journal Entries:

Year 1:

16 Dec. Accepted $10800 60 Day 8% note-

Notes Receivable A/c-------------Dr. 10800

To Danny Todd (A/c Receivable) A/c. 10800

31 Dec. Made an entry to record interest receivable

Interest Receivable A/c. ----------Dr. 144 (10800*8%*60/360)

To Interest Income A/c. 144

Year 2:

14 Feb. Cash A/c.-----------Dr. 10944

To Notes Receivable A/c. 10800

To Interest Receivable A/c.144

2 March  Notes Receivable A/c-------------Dr. 6100

To Midnight Co. (A/c Receivable) A/c. 6100

17 March  Notes Receivable A/c. -------------Dr. 2400

To Ava Privet (A/c Receivable) A/c. 2400  

16 April Ava Privet (A/c Receivable) A/c.----Dr.  2414

To Notes Receivable A/c. 2400

To Interest Income A/c. 14

31 May Midnight Co.(A/c Receivable) A/c.----Dr.  6222

To Notes Receivable A/c. 6100

To Interest Income A/c. 122

7 Aug Notes Receivable A/c. -------------Dr. 7440

To Mulan Co. (A/c Receivable) A/c. 7440

3 Sept Notes Receivable A/c. -------------Dr. 2100

To Noah Carson (A/c Receivable) A/c. 2100

2 Nov Cash A/c.-----------Dr. 2135

To Notes Receivable A/c. 2100

To Interest Receivable A/c.35

5 Nov Cash A/c.-----------Dr. 7626

To Notes Receivable A/c. 7440

To Interest Receivable A/c.186

1 Dec. Allowance for Bad Debts A/c. -----------Dr. 2414

To Ava Privet (A/c Receivable) A/c.----Dr.  2414

2. Analysis Component:

Include, in the accounts receivable account description, a note stating the amount of the receivables pledged as collateral and a description of the loan for which they were pledged. For example, assume Ohlm Company pledged $4,000 of it's accounts receivable as collateral for a short-term loan. It can write “$4,000 of A/R pledged as collateral for short-term loan” in the account description.