Question

QUESTION 7a:

Alpha Company prepares quarterly adjusting entries. On November 1, 2017, Alpha Company purchased equipment with a sticker price of $8,515 and signed a note due in 9 months for $10,000 that included interest in the value of the note. Use this information to prepare a general journal entry for the August 1 equipment purchase. Prepare any additional general journal adjusting entries for Fiscal Years 2017 & 2018. Additionally, prepare the general journal entry to record the payment of the note when due in 2018.

General Journal

General Journal

Date	Accounts	Debit	Credit
11/1/17
12/31/17
3/31/18
6/30/18
7/31/18

QUESTION 7b:

Alpha Company uses aging of Accounts Receivable to estimate uncollectible. The unadjusted Trial Balance amount of Accounts Receivable on December 31, 2016, has a balance that consists of:

Days outstanding	Amount	Estimated Uncollectible
0 – 60	$300,000	1%
61 – 120	90,000	2%
Over 120	100,000	6%
Total	$490,000	4,005

Activity during FiscalYear 2016, for Alpha Company consisted of July 15 Alpha wrote of the Bravo Zulu Company account as not collectable for the amount of $8,500.

Oct. 20 Alpha company recovered $5,500 from the Charlie Delta Company for settlement of their prior debt that had been off during FY 2015.

Alpha Company’s December 31, 2015 allowance for uncollectible accounts was $2,700/ Under the aging method, what amounts should Alpha Company report at December 31, 2016 for:

1. Allowance for Uncollectible Accounts

2. Bad Debt Expense

ANSWER 7:

            1.___________________________

            2.___________________________

Answer 1

Q7a:
Date	Account titles and explanations	Debit ($)	Credit ($)
01-Nov-17	Equipment	8,515.00
	Interest expenses (10000 - 8515)	1,485.00
	Notes payable		10,000.00
	(Being equipment purchased in exchange of notes payable)
31-Dec-17	Profit and loss account (1485 x 2/9)	330.00
	Interest expenses		330.00
	(Being interest expenses for 2 months charged)
31-Mar-18	Profit and loss account (1485 x 3/9)	495.00
	Interest expenses		495.00
	(Being interest expenses for 3 months charged)
30-Jun-18	Profit and loss account (1485 x 3/9)	495.00
	Interest expenses		495.00
	(Being interest expenses for 3 months charged)
31-Jul-18	Profit and loss account (1485 x 1/9)	165.00
	Interest expenses		165.00
	(Being interest expenses for 1 month charged)
	Notes payable	10,000.00
	Bank		10,000.00
	(Being full and final settlement made against notes payable)

Q7b
Allowance for uncollectible accounts
Particulars	Amount ($)
Estimated uncollectible amount	4,005.00
Less: Already provided in FY 2015	2,700.00
Allowance for uncollectible accounts for FY 2016	1,305.00
Bad debt expenses
Bravo Zulu balance	8,500.00
Less: Debt recovered in 2016 written off earlier	5,500.00
Bad debt expenses	3,000.00