Question

Prepare general journal entries for the following transactions of Laurier Company, who use the perpetual inventory system: Apr. 1 Sold $12,500 of merchandise (Cost $10,500) to flight Co., receiving a 10%, 120-day note. 15 Wrote off $2,000 owed by FCB Co. as worthless. (The allowance method of accounting for bad debts is used.) 30 Received a $10,800, 10%, 30-day note receivable from Cruise Co. as an extension of credit. May 1 Issued a $7,000, 9%, 60 day note to Auggie Co. for cash. 30 Note received on April 30 was collected. June 30 Auggie Co. honoured May 1st note. 30 Accrued interest on outstanding notes. July 15 FCB Co. paid $1,000 of the amount written off on April 15 above. Laurier does not expect to receive any further payments.

Answer 1

Note - In the absense of information I have consider 360 Days = Year.

1. Journal Entries -

Date Credit Laurier Company Journal Entries Accounts Title Debit Notes Receivable $ 12,500 Sales Revenue (Being Sales revenue earned on account) Apr 1 $ 12,500 Apr 1 Cost of Goods Sold $ 10,500 Merchandise Inventory (Being cost of good sold incurred) $ 10,500 Apr 15 Allowance for doubtful accounts $ 2,000 Accounts Receivable (Being Accounts Receivable write off) $ 2,000 Apr 30 Notes Receivable $ 10,800 Accounts Receivable (Being notes Accepted on account) $ 10,800 May 1 Cash $ 7,000 Notes Payable $ 7,000 (Being Notes payable issued for 9% and for 60 days) May 30 Cash $ 10,890 Interest Income Notes Receivable (Being Notes receivable matured) ($10,800 X 10% X 30/360 Days) $ 90 $ 10,800 June 30 Notes Payable $ 7,000 Interest Expense $ 105 Cash (Being Noted Issued Matured) ($7,000 X 9% X 60/360 Days) $ 7,105 $ 313 June 30 Interest Receivable $ 313 Interest Income (Being interest earned on the notes) ($12,500 X 10% X 90/360 Days) July 15 Accounts Receivable $ 1,000 Allowance for doubtful accounts $ 1,000 (Being Accounts Receivable previously written off) July 15 Cash $ 1,000 Accounts Receivable (Being Amount received on account) $1,000