Required
Prepare entries to record the following transactions of Wipe-Out Company:
Mar. 2 Accepted a $10,240, 5%, 90-day note dated this day in granting a time extension on the past-due account of )NC Company.
Apr. 21 Discounted, with recourse, the |NC Company note at BancFirst at a cost of $50. June 2 Received notice from BancFirst that JNC Company defaulted on the note due May 31. Paid the bank the principal plus interest due on the note
July 16 Received payment from JNC Company for the maturity value of its dishonoured note plus interest for 45 days beyond maturity at 5%.
Sept. 3 Accepted a $4,160, 60-day, 5% note dated this day in granting Cecile Duval a time extension on her past-due account.
18 Discounted, without recourse, the Duval note at BancFirst at a cost of $25.
Analysis Component:
What reporting is necessary when a business discounts notes receivable with re-course and these notes have not reached maturity by the end of the fiscal period? Explain the reason for this requirement and what accounting principle is being satisfied.