Question

Year 1 Dec. 16 Accepted a $13,200, 60-day, 10% 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) $7,000, 10%, 90-day note in granting a time extension on the past-due account receivable from Midnight Co. 17 Accepted a(n) $3,300, 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) $9,000, 90-day, 11% note in granting a time extension on the past-due account receivable of Mulan Co. Sep. 3 Accepted a(n) $2,680, 60-day, 11% 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. 1-b. Use the calculated value to prepare your journal entries for Year 1 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 Year 2 transactions. 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

1 ) a)
		Total through	Interest recognised
		maturity	Dec-31
	Principal	13200	13200
	Rate	10%	10%
	Time	60/360	15/360
	Total Interest ($)	220	55
		( 13200 * 10% * 60 / 360 )	( 13200 * 10% * 15 / 360)

1 ) b)

Date	particular	Debit($)	Credit ($)
Dec-16	Notes receivable D todd	13200
	To accounts Receivable		13200
Dec-31	Interest receivable	55
	To Interest Revenue		55

1) c)

	midnight co	A privet note	mulan note	midnight co	N carson
	Mar-02	Mar-17	Aug-07	May-31	Sep-03
Principal	7000	3300	9000	7175	2680
Rate	10%	7%	11%	10%	11%
Time	90 / 360	30 / 360	90/360	46/360	60 / 360
Total Interest ($)	175	19.25	247.5	91.68	49.13
Working	( 7000 * 10% * 90/360)	( 3300 * 7% * 30/360)	( 9000 * 11% * 90 / 360)	( 7175* 10% * 46/360)	( 2680 * 11% *60/360)

1) d)

1)d)
Date	Particular	Debit($)	Credit ($)
Feb-14	Cash	13420
	To Interest revenue		165
	To Interest receivable		55
	To Notes Recievable - D todd		13200
Mar-02	Notes receivable	7000
	To Accounts receivable - Midnight co		7000
Mar-17	Notes Receivable	3300
	To accounts receivable - A privet		3300
Apr-16	Accounts receivable	3319.25
	To Notes recivable - A privet		3300
	To Interest revenue		19.25
May-31	Accounts receivable - midnight co	7175
	To Notes receivable		7000
	To Interest revenue		175
Jul-16	Cash	7266.68
	To Interest revenue		91.68
	To Accounts receivable midnight co		7175
Aug-07	Notes receivable	9000
	To accounts receivable - Mulan		9000
Sep-03	Notes Receivable	2680
	To accounts receivable - N Carson		2680
Nov-02	Cash	2729.13
	To Interest revenue		49.13
	To Notes receivable - N Carson		2680
Nov-05	Cash	9247.5
	To Interest revenue		247.5
	To Notes receivale - Mulan		9000
Dec-01	Allowance for doubtful accounts	3319.25
	To Accounts receivable - A privet		3319.25