Question

In: Accounting

On July 9, 2018, Omar Co. purchased a machine for 260,000 SA from Saudi Machine Company...

On July 9, 2018, Omar Co. purchased a machine for 260,000 SA from Saudi Machine Company (SMC). Omar gave SMC 7% note due in 120 days in payment for the machine. (5 Points)

What is the maturity date of the note?

How much interest will Omar pay to SMC on this note?

Pass the Journal entry for Notes Receivable transaction.

On October 16, 2018, Omar informs us that the company is unable to pay the note or interest?

What adjusting entry is required on December 2018?

On October 31, 2017, Aziz Company sells a truck that originally cost 140,000 SA for 95,000 SA cash. The truck was placed in service on January 1, 2012. It was depreciated using the straight-line method with an estimated salvage value of 28,000 and a useful life of 10 years. Record all the transactions? (2.5 points)

The trial balance before adjustment of XYZ Company reports the following balances: (2.5 points)

                                                                                        Dr.                  Cr.   

Accounts receivable                                                 $100,000

Allowance for doubtful accounts                                                    $    2,500

Sales (all on credit)                                                                            750,000

Sales returns and allowances                                       40,000

Instructions

            Pass the journal entries for estimated bad debts assuming that doubtful debts accounts are estimated to be

(1)        6% of gross accounts receivable and

(2)        1% of net sales.

Solutions

Expert Solution

What is the maturity date of the note?

Maturity date of Note is 6th Nov 2018

(9-7-2018 + 120 days)

How much interest will Omar pay to SMC on this note?

=260000*7%/365*120=5983.56

Pass the Journal entry for Notes Receivable transaction.

DR CR
Cash 265,983.56
Interest Revenue 5,983.56
Notes Receivable 260000

What adjusting entry is required on December 2018?

DR CR
Notes Receivable 260000
Allowance for bad debts 260000

On October 31, 2017, Aziz Company sells a truck that originally cost 140,000 SA for 95,000 SA cash.

DR CR
Cash 95000
Accumulated Depreciation 54,133.33
Gain on sale 9,133.33
truck 140000

Depreciation calculation

2012 (140000-28000)/10 11200
2014 11200
2015 11200
2016 11200
2017 11200*10/12 9,333.33
Total Depreciation 54,133.33

he trial balance before adjustment of XYZ Company

1

DR CR
Bad debt expense 100000*.06-2500 3500
Allowance for doubtful accounts 3500

2

DR CR
Bad debt expense (750000-40000)*1% 7100
Allowance for doubtful accounts 7100

ekkarill92 answered 2 years ago
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