Question

Weldon Corporation’s fiscal year ends December 31. The following is a list of transactions involving receivables that occurred during 2021:

Mar. 17 Accounts receivable of $3,400 were written off as uncollectible. The company uses the allowance method.

30 Loaned an officer of the company $39,000 and received a note requiring principal and interest at 7% to be paid on March 30, 2022.

May 30 Discounted the $39,000 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 $29,000. 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 $6,700 and accepted a $8,400 noninterest-bearing note with a discount rate of 8%. The $8,400 payment is due on February 28, 2022. The stock has no ready market value.

Dec. 31 Weldon estimates that the allowance for uncollectible accounts should have a balance in it at year-end equal to 3% of the gross accounts receivable balance of $960,000. The allowance had a balance of $29,000 at the start of 2021.

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

Solution

Date	General journal	Debit	Credit
Mar 17	allowance for uncollectible accounts Dr	$3400
	To accounts receivable		$3400
Mar 30	7% Notes receivable	$39000
	To cash		$39000
May 30	interest receivable. Dr	$455
	To interest revenue(39000*7%*2/12)		$455
May 30	cash. Dr	$38961
	Loss on sales of note receivable	$494
	To note receivable		$39000
	To interest receivable		$455
June 30	Account receivable. Dr	$29000
	To sales revenue		$29000
July 8	cash. Dr	$28420
	Sales discount	$580
	To Account receivable		$29000
Aug 31	notes receivable. Dr	$8400
	To discount on notes receivable		$336
	To investment		$6700
	To gain on sale of investment		$1364
Dec 31	discount on notes receivable. Dr	$224
	To interest revenue(8400*8%)*4/12		$224
Dec 31	Bad debt expenses	$3200
	Allowance for uncollectible Accounts (note)		$3200

Note - Allowance for uncollectible Account closing balance =960000*3%. =$28800

Add amount written off $3400

$32200

Less allowance for uncollectible Account beginning balance. =($29000)

=$3200