Question

In: Accounting

QUESTION 3: Alphas Company had the following events during FY 2017: Mar. 1 – Accepted Bravo...

QUESTION 3:

Alphas Company had the following events during FY 2017:

Mar. 1 – Accepted Bravo Company’s 4 month, 9% note, as settlement of an outstanding $18,000 accounts receivable for goods sold in the prior year.

Mar. 15 – Sold, $27,200 of equipment (from merchandise inventory) to Charlie Company and accepted 9 months, 6% note.

Mar. 21 – Loaned Delta Company $22,800 cash and accepted a 90 days, 9% note.

June. 19 – Received payment from Delta Company.

July 1 – Received payment from Bravo Company.

Dec. 16 – Received payment from Charlie Company.

Alpha Company uses the periodic system for inventory sales and prepares quarterly adjusting entries. Use this information to prepare the compound General Journal entries (without explanation) for all events related to the notes. Students may add the company names after the note receivable account names to further identify the various subsidiary note transactions.

Calculations for any interest must be done on a standard 365 day year for notes where the term is set in days. Use whole months (or fractions thereof) for notes with term limits set in months or years.

General Journal

Date

Accounts

Debit

Credit

Mar. 1

Mar. 15

Mar. 21

Mar. 31

June 19

June 30

July 1

Sept. 30

Dec. 16

Solutions

Expert Solution

journal entries :

date particulars l/f debit credit
1 mar bravo note receivable a/c dr 18000
to account receivable a/c 18000
(being accepted note of bravo's compant 9% note)
15 mar charlie note receivable a/c dr 27200
to sales / account receivable a/c 27200
(being sold of equipment to charlie)
21 mar delta note receivable a/c dr 22800
to cash a/c 22800
(accepted 9% note and paid cash)
31 mar interest receivable a/c dr (working note 1) 250
to interest revenue a/c 250
(being interest calculated)
19 june cash a/c dr 23305.37
to interest receivable a/c (working note 1) 50
to interest revenue a/c (working note 2) 455.37
to delta note receivable a/c 22800
(being delta account settled)
30 june interest receivable a/c dr (working note 3) 813
to interest revenue a/c 813
(being interest calculated)
1 july cash a/c dr 18538
to interest receivable a/c (working note 4) 538
to bravo note receivable a/c 18000
(being bravo iaccount settled)
30 sep interest receivble a/c dr (working note 3) 408
to interest revenue a/c 408
(being interest calculated)
16 dec cash a/c dr 28478
to interest receivable a/c (27200 * 0.06 (211 / 365)) 943
to interest revenue a/c (27200 * 0.06 (75 / 365)) 335
to charlie note receivable a/c 27200
(being charlie account settled)

working note 1 :

calculation of interest at quarter end :

interest = note value * rate * (number of days / 365)

bravo interest = 18000 * 0.09 * (30 / 365) = 133

charlie interest = 27200 * 0.06 * (15 / 365) = 67

delta interest = 22800 * 0.09 * (9 / 365) = 50

total interest = 133 + 67 + 50 = 250

working note 2 :

interest revenue of delta :

total interest revenue = 22800 * 0.09 * (81 / 365)

= 455.37

working note 3 :

calculate interest on 30 june :

bravo interest = 18000 * 0.09 * (3 / 12) = 405

charlie interest = 27200 * 0.06 *(3 / 12) = 408 (also 30sep)

total interest receivable = 813

working note 4 :

total interest of bravo = interest of mar 31 ended + interest of june 30

= 133 + 405

= 538


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