Question

The following transactions are from Ohlm Company. (Use 360 days a year.)

Year 1

Dec.		16		Accepted a $14,400, 60-day, 9% note in granting Danny Todd a time extension on his past-due account receivable.
		31		Made an adjusting entry to record the accrued interest on the Todd note.

Year 2

Feb.		14		Received Todd’s payment of principal and interest on the note dated December 16.
Mar.		2		Accepted a(n) $7,700, 9%, 90-day note in granting a time extension on the past-due account receivable from Midnight Co.
		17		Accepted a(n) $2,700, 30-day, 7% note in granting Ava Privet a time extension on her past-due account receivable.
Apr.		16		Privet dishonored her note.
May		31		Midnight Co. dishonored its note.
Aug.		7		Accepted a(n) $8,900, 90-day, 12% note in granting a time extension on the past-due account receivable of Mulan Co.
Sep.		3		Accepted a(n) $2,330, 60-day, 8% note in granting Noah Carson a time extension on his past-due account receivable.
Nov.		2		Received payment of principal plus interest from Carson for the September 3 note.
Nov.		5		Received payment of principal plus interest from Mulan for the August 7 note.
Dec.		1		Wrote off the Privet account against the Allowance for Doubtful Accounts.

Required:
1-a. First, complete the table below to calculate the interest amount at December 31, Year 1.

	Total Through Maturity Interest Recognized December 31 Principal Rate (%) Time Total interest

1-b. Use the calculated value to prepare your journal entries for Year 1 transactions.

• 1

  Accepted a $14,400, 60-day, 9% note in granting Danny Todd a time extension on his past-due account receivable.

• 2

  Made an adjusting entry to record the accrued interest on the Todd note.

1-c. First, complete the table below to calculate the interest amounts.

First, complete the table below to calculate the interest amounts. (Do not round intermediate calculations.)

	Total Through Maturity Midnight Co. Note - March 2, Year 2 A. Privet Note - March 17, Year 2 Mulan Note - August 7, Year 2 N. Carson Note - September 3, 2017 Principal Rate (%) Time Total interest

1-d. Use those calculated values to prepare your journal entries for Year 2 transactions.

• 1

  Received Todd’s payment of principal and interest on the note dated December 16.

• 2

  Accepted a(n) $7,700, 9%, 90-day note in granting a time extension on the past-due account receivable from Midnight Co.

• 3

  Accepted a(n) $2,700, 30-day, 7% note in granting Ava Privet a time extension on her past-due account receivable.

• 4

  Privet dishonored her note.

• 5

  Midnight Co. dishonored its note.

• 6

  Accepted a(n) $8,900, 90-day, 12% note in granting a time extension on the past-due account receivable of Mulan Co.

• 7

  Accepted a(n) $2,330, 60-day, 8% note in granting Noah Carson a time extension on his past-due account receivable.

• 8

  Received payment of principal plus interest from Carson for the September 3 note.

• 9

  Received payment of principal plus interest from Mulan for the August 7 note.

• 10

  Wrote off the Privet account against the Allowance for Doubtful Accounts.

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

D.Todd note-December 16,2011
		total	interest
		through	recognized
		maturity	31-Dec
Principal		14,400	14,400
Rate(%)		9%	9%
time		60/360	15/360
total interest		216	54
Date	General journal				Debit	credit
2015
16-Dec	Note receivable				14,400
	Account receivable					14,400
31-Dec	interest receivable				54
	interest revenue					54
		Midnight	privet	Mulan		carson
		2-Mar	17-Mar	7-Aug		3-Sep
		2017	2017	2017		2017
Principal		7,700	2,700	8,900		2,330
Rate(%)		9%	7%	12%		8%
time		90/360	30/360	90/360		60/360
total interest		173	16	267		31

Date	General journal				Debit	credit
2016
14-Feb	Cash				14,627
	interest revenue					173
	Note receivable-T Todd					14,400
	interest receivable					54
2-Mar	Note receivable				7,700
	Account receivable-Midnight co					7,700
17-Mar	Note receivable				2,700
	Account receivable-Privet					2,700
16-Apr	Account receivable-privet				2,716
	note receivable					2,700
	interest revenue					16
31-May	Account receivable-Midnight				7,873
	note receivable					7,700
	interest revenue					173
7-Aug	Note receivable				8,900
	account receivable-Mulan Co					8,900
3-Sep	Note receivable				2,330
	account receivable-Carson					2,330
2-Nov	cash				2,361
	note receivable					2,330
	interest revenue					31
5-Nov	cash				9,167
	note receivable					8,900
	interest revenue					267
1-Dec	Allowance for Doubtful accounts				2,716
	Account receivable-privet					2,716

2)

Pledge Disclosure of the arrangement in notes to the financial statement