All sales for Ronnie Co. are made with credit terms of 2/10, n/30. If a customer is unable to pay by the end of the credit period, Ronnie Co. will exchange the account receivable for a12%, 90-day note receivable. On September 12, 2009, Chandra Co. purchased $5,500 of merchandise from Ronnie Co. However, Chandra Co. could not pay for the merchandise on the due date.
Required:
(a) What was Chandra Co.’s original due date for payment for the merchandise?
(b) If Chandra Co. had been able to pay for the merchandise within the discount period, on what date and how much would Chandra Co. have paid?
(c) On what date is the note receivable due? What is the total amount that will need to be paid at that time?
(d) Prepare all necessary journal entries for Ronnie Co.’s transactions with Chandra Co., assuming that payment is made for the note on its due date.
(e) Given its terms of business, do you think that Ronnie Co. should make an estimate for uncollectible notes receivable? Provide rationale for your answer.