Question

Weldon Corporation’s fiscal year ends December 31. The following is a list of transactions involving receivables that occurred during 2018:

Mar.		17		Accounts receivable of $1,700 were written off as uncollectible. The company uses the allowance method.
March		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, 2019.
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, 2019. 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 2018 were $700,000.

Required:

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

1) Required Journal entries are provided below :
Date	Accounts title and explaination	Debit	Credit
17-03-18	Allowance for doubtful accounts	1700
	To Accounts receivbale		1700
	(To record uncollectibles written off)
30-03-18	Notes receivables	20000
	To cash		20000
	(To record amount loaned to officer)
30-05-18	Cash	18400
	Loss on discounting of notes receivable	1600		20000*8%
	To notes receivable		20000
	(To record notes receivable discounted)
30-06-18	Accounts receivable	12000
	To sales revenue		12000
	(To record sales revenue)
08-07-18	Cash	9600
	Sales discount	2400		(12000*2%)
	To accounts receivable		12000
	(To record cash receipt from receivables)
31-08-18	Notes receivables	6000
	To stock investment		5000
	To gain on sale of stock investment		773	[(6000*0.962)-5000]		Where, 0.962 = PV i=8%, n=6/12
	To deferred interest revenue		227
	(To record stock investment sold)
31-12-18	bad debt expense	14000			(700000*2%)
	TO allowance for doubtful accounts		14000
	(To record bad debt expense)
2) Required adjusting entries are provided as below :
Date	Accounts title and explaination	Debit	Credit
31-12-18	Interest receivable	1050			(20000*7%*9/12)
	TO interest revenue		1050
	(To record interest revenue)
31-12-18	Deferred interest revenue	154
	To interest revenue		154		(5773*8%*4/12)
	(To record interest revenue)