Accounts and Notes Receivable Linus Corp. sold merchandise for $5,000 to C. Brown on May 15, 2010, with payment due in 30 days. Subsequent to this, Brown experienced cash fl ow problems and was unable to pay its debt. On August 10, 2010, Linus stopped trying to collect the outstanding receivable from Brown and wrote off the account as uncollectible.

On December 1, 2010, Brown sent Linus a check for $1,000 and offered to sign a two-month, 9%, $4,000 promissory note to satisfy the remaining obligation. Brown paid the entire amount due Linus, with interest, on January 31, 2011. Linus ends its accounting year on December 31 each year and uses the allowance method to account for bad debts.

Required 1. Identify and analyze all transactions on the books of Linus Corp. from May 15, 2010 to January 31, 2011.

2. Why would Brown bother to send Linus a check for $1,000 on December 1 and agree to sign a note for the balance, given that such a long period of time had passed since the original purchase?

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