Question

Weldon Corporation’s fiscal year ends December 31. The following is a list of transactions involving receivables that occurred during 2017:

Mar. 17 Accounts receivable of $1,700 were written off as uncollectible. The company uses the allowance method.30 Loaned an officer of the company $20,000 and received a note requiring principal and interest at 7% to be paid on March 30, 2018.

May 30 Discounted the $20,000 note at a local bank. The bank’s discount rate is 8%. The note was discounted without recourse and the sale criteria are met.

June 30 Sold merchandise to the Blankenship Company for $12,000. Terms of the sale are 2/10, n/30. Weldon uses the gross method to account for cash discounts.

July 8 The Blankenship Company paid its account in full.

Aug. 31 Sold stock in a nonpublic company with a book value of $5,000 and accepted a $6,000 noninterest-bearing note with a discount rate of 8%. The $6,000 payment is due on February 28, 2018. The stock has no ready market value.

Dec. 31 Bad debt expense is estimated to be 2% of credit sales for the year. Credit sales for 2017 were $700,000.

1 & 2. Prepare journal entries for each of the above transactions and additional year-end adjusting entries indicated. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round intermediate calculations and round your final answers to nearest whole dollar.)

Answer 1

Date	Particulars	Debit	Credit
17-Mar	Allowance for uncollectible accounts	1700
	Accounts receivable		1700
30-Mar	Note receivable	20000
	Cash		20000
May-30	Interest Receivable	233.33
	Interest Revenue (20,000 x 7% x 2/12)		233.33
	Cash	19973
	Loss on Sale of Notes Receivable	260
	Note receivable		20000
	Interest Receivable		233
Jun-30	Accounts receivable	12000
	Sales revenue		12000
08-Jul	Cash (12,000 x 98%)	11760
	Sales discounts (12,000 x 2%)	240
	Accounts receivable		120000
Aug. 31	Notes receivable (face amount)	6000
	Discount on note receivable		231
	Investments (book value)		5000
	Gain on sale of investments (difference)		769
	PV(FV=6,000, pmt=0, n=6/12, i=8%) = 7,547
Dec. 31	Bad debt expense ($700,000 x 2%)	14000
	Allowance for uncollectible accounts		14000

Working note

FV of Note: 20000

Maturity Value (20000+20000*7%)=21400

Discount = 21400*8%*10/12=1427

Proceed= 21400-1427=19973