Question

Problem 9-5A Analyzing and journalizing notes receivable transactions LO C2, C3, P4

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

2016

Dec.		16		Accepted a $12,600, 60-day, 6% note dated this day 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.

2017

Feb.		14		Received Todd’s payment of principal and interest on the note dated December 16.
Mar.		2		Accepted a(n) $7,500, 6%, 90-day note dated this day in granting a time extension on the past-due account receivable from Midnight Co.
		17		Accepted a(n) $2,800, 30-day, 7% note dated this day in granting Ava Privet a time extension on her past-due account receivable.
Apr.		16		Privet dishonored her note when presented for payment.
May		31		Midnight Co. refused to pay the note that was due to Ohlm Co. on May 31. Prepare the journal entry to charge the dishonored note plus accrued interest to Midnight Co.'s accounts receivable.
July		16		Received payment from Midnight Co. for the maturity value of its dishonored note plus interest for 46 days beyond maturity at 6%.
Aug.		7		Accepted a(n) $7,150, 90-day, 11% note dated this day in granting a time extension on the past-due account receivable of Mulan Co.
Sep.		3		Accepted a(n) $2,930, 60-day, 8% note dated this day 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, 2016.
1-b. Use the calculated value to prepare your journal entries for 2016 transactions.
1-c. First, complete the table below to calculate the interest amounts.
1-d. Use those calculated values to prepare your journal entries for 2017 transactions.

Answer 1

D.Todd note-December 16,2012
		total	interest
		through	recognized
		maturity	31-Dec
Principal		12,600	12,600
Rate(%)		6%	6%
time		60/360	15/360
total interest		126	32
Date	General journal				Debit	credit
2016
16-Dec	Note receivable				12,600
	Account receivable					12,600
31-Dec	interest receivable				32
	interest revenue					32
Midnight Co Note-March 2,2017
		total
		through
		maturity
Principal		7,500
Rate(%)		6%
time		90/360
total interest		113
A.Privet note -March 17,2013
		total
		through
		maturity
Principal		2,800
Rate(%)		7%
time		30/360
total interest		16
Mulan note -august 7,2013
		total
		through
		maturity
Principal		7,150
Rate(%)		11%
time		90/360
total interest		197
Midnight Co Note-may 31 2,2017
		Addittional
		interest
Principal		7,613
Rate(%)		6%
time		46/360
total interest		58
Carson note - Sept 3,2013
		total
		through
		maturity
Principal		2,930
Rate(%)		8%
time		60/360
total interest		39
Date	General journal				Debit	credit
2017
14-Feb	Cash				12726
	interest revenue					95
	Note receivable-T Todd					12,600
	interest receivable					32
2-Mar	Note receivable				7,500
	Account receivable-Midnight co					7,500
17-Mar	Note receivable				2,800
	Account receivable-Privet					2,800
16-Apr	Account receivable-privet				2,816
	note receivable					2,800
	interest revenue					16
31-May	Account receivable-Midnight				7,613
	note receivable					7,500
	interest revenue					113
16-Jul	Cash				7,671
	Account receivable-Midnight					7,613
	interest revenue					58
7-Aug	Note receivable				7,150
	account receivable-Mulan Co					7,150
3-Sep	Note receivable				2,930
	account receivable-Carson					2,930
2-Nov	cash				2,969
	note receivable					2,930
	interest revenue					39
5-Nov	cash				7,347
	note receivable					7,150
	interest revenue					197
1-Dec	Allowance for Doubtful accounts				2,816
	Account receivable-privet					2,816