Accounts and Notes Receivable

Lenox Corp. sold merchandise for $6,500 to M. Baxter on May 15, 2017, with payment due in 28 days. Subsequent to this, Baxter experienced cash-flow problems and was unable to pay its debt. On August 10, 2017, Lenox stopped trying to collect the outstanding receivable from Baxter and wrote off the account as uncollectible. On December 1, 2017, Baxter sent Lenox a check for $900 and offered to sign a two-month, 6%, $5,600 promissory note to satisfy the remaining obligation. Baxter paid the entire amount due Lenox, with interest, on January 31, 2018. Lenox ends its accounting year on December 31 each year and uses the allowance method to account for bad debts.

Required:

Question Content Area

Identify and analyze all transactions on the books of Lenox Corp. from May 15, 2017, to January 31, 2018. Do not round intermediate calculations. If required, round your final answer to the nearest dollar.

2. Why would Baxter bother to send Lenox a check for $900 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? Choose the best answer:

1-Baxter was required to do this to avoid bankruptcy.

2-Baxter would want to reestablish their good credit standing with supplier in order to purchase products in the future.

3-Baxter's owner could not bear the guilt of nonpayment.