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

Date	Account title and explanation	Debit	Credit
1. Journal entry
Feb-01	Accounts receivable-Ames Co.	$ 8,000
	Sales revenue		$ 8,000
	Cost of goods sold	$ 4,500
	Merchandise inventory		$ 4,500
Mar-15	Notes receivable-Ames Co.	$ 8,000
	Accounts receivable-Ames Co.		$ 8,000
Apr-09	Allowance for doubtful accounts	$ 2,500
	Accounts receivable-Dorset Co.		$ 2,500
Apr-21	Notes receivable-Jill Klein	$ 7,500
	Cash		$ 7,500
May-14	Cash (8,000*12%*60/360)	$ 160
	Notes receivable-Ames Co.	$ 8,000
	Interest revenue		$ 160
	Notes receivable-Ames Co.		$ 8,000
Jun-13	Accounts receivable-Dorset Co.	$ 2,500
	Allowance for doubtful accounts		$ 2,500
	Cash	$ 2,500
	Accounts receivable-Dorset Co.		$ 2,500
Jun-20	Accounts receivable-Jill Klein	$ 7,763
	Notes receivable-Jill Klein		$ 7,500
	Interest revenue ($7,500*14%*90/360)		$ 263
Aug-12	Cash	$ 8,280
	Notes receivable-Ames Co.		$ 8,000
	Interest revenue ($8,000*14%*90/360)		$ 280
Aug-19	Cash	$ 7,860
	Accounts receivable-Jill klein		$ 7,763
	Interest revenue ($7,763*15%*30/360)		$ 97
Dec-16	Notes receivable-Global company	$ 12,000
	Accounts receivable-Global company		$ 12,000
Dec-31	Bad debt expense ($1,375,000*3%)	$ 41,250
	Allowance for doubtful accounts		$ 41,250
2. Adjusting entry
Dec-31	Interest receivable-Global Co.($12,000*12%*15/360)	$ 60
	Interest revenue		$ 60