Question

Ditzler Company, a construction supply company, uses the allowance method of accounting for uncollectible accounts receivable. Selected transactions completed by Ditzler company are as follows:

Feb 1          Sold merchandise on account to Ames Co., $8000. The cost of the

merchandise sold was $4500

Mar. 15      Accepted a 60-day, 12% note for $8000 from Ames Co. on account

Apr. 9        Wrote off a $2500 account from Dorset Co. as uncollectible

Apr. 21       Loaned $7500 cash to Jill Klein, receiving a 90-day, 14% note

May 14       Received the interest due from Ames Co. and a new 90-day, 14% note

as a renewal of the loan. (Record both the debit and the credit to the

notes receivable account).

June 13       Reinstated the account of Dorset Co., written off on April 9, and

received $2500 in full Payment

July 20       Jill Klein dishonored her note

Aug. 12      Received from Ames Co. the amount due on its note of May 14

Aug 19       Received from Jill Klein the amount owed on the dishonored note,

plus interest for 30 day at 15% computed on the maturity value of the

note

Dec 16       Accepted a 60-day, 12% note for $12000 from Global company on

Account

Dec 31       It is estimated that 3% of the credit sales of $1,375,000 for the year

ended December 31 will be uncollectible

Instructions:

1. Journalize the transactions

2. Journalize the adjusting entry to record the accrued interest on December 31 on the Global Company note.

Answer 1

Part 1)

The journal entries are prepared as below:

Date	Account Titles	Debit	Credit
Feb-01	Accounts Receivable - Ames Co.	$8,000.00
	Sales		$8,000.00
Feb-01	Cost of Merchandise Sold	$4,500.00
	Merchandise Inventory		$4,500.00
Mar-15	Notes Receivable - Ames Co.	$8,000.00
	Accounts Receivable - Ames Co.		$8,000.00
Apr-09	Allowance for Doubtful Accounts	$2,500.00
	Accounts Receivable - Dorset Co.		$2,500.00
Apr-21	Notes Receivable - Jill Klein	$7,500.00
	Cash		$7,500.00
May-14	Notes Receivable - Ames Co.	$8,000.00
	Cash	$160.00
	Notes Receivable - Ames Co.		$8,000.00
	Interest Revenue (8,000*12%*60/360)		$160.00
Jun-13	Accounts Receivable - Dorset Co.	$2,500.00
	Allowance for Doubtful Accounts		$2,500.00
Jun-13	Cash	$2,500.00
	Accounts Receivable - Dorset Co.		$2,500.00
Jul-20	Accounts Receivable - Jill Klein	$7,762.50
	Notes Receivable - Jill Klein		$7,500.00
	Interest Revenue (7,500*14%*90/360)		$262.50
Aug-12	Cash	$8,280.00
	Notes Receivable - Ames Co.		$8,000.00
	Interest Revenue (8,000*14%*90/360)		$280.00
Aug-19	Cash	$7,859.53
	Accounts Receivable - Jill Klein		$7,762.50
	Interest Revenue (7,762*15%*30/360)		$97.03
Dec-16	Notes Receivable - Global Company	$12,000.00
	Accounts Receivable - Global Company		$12,000.00
Dec-31	Bad Debt Expense	$41,250.00
	Allowance for Doubtful Accounts (1,375,000*3%)		$41,250.00

_____

Part 2)

The adjusting entry is given as follows:

Date	Account Titles	Debit	Credit
Dec-31	Interest Receivable (12,000*12%*15/360)	$60.00
	Interest Revenue		$60.00