Question
eBook Accounts and Notes Receivable Lenox Corp. sold merchandise for $3,700 to M. Baxter on May 15, 2017, with payment due in 28 days. Subsequent
eBook
Accounts and Notes Receivable
Lenox Corp. sold merchandise for $3,700 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, 12%, $2,800 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.
How does this entry affect the accounting equation? If a financial statement item is not affected, select "No Entry" and leave the amount box blank. If the effect on a financial statement item is negative, i.e, a decrease, be sure to enter the answer with a minus sign.
| Balance Sheet | Income Statement | |||||||||||||
| Stockholders' | Net | |||||||||||||
| Assets | = | Liabilities | + | Equity | Revenues | Expenses | = | Income | ||||||
| Accounts Payable - M. BaxterAllowance for Doubtful AccountsBad Debts ExpenseCashSales RevenueNo Entry | fill in the blank 012db8ff903300f_2 | Allowance for Doubtful AccountsBad Debts ExpenseNotes PayableNotes ReceivableSales RevenueNo Entry | fill in the blank 012db8ff903300f_4 | fill in the blank 012db8ff903300f_5 | Accounts Payable - M. BaxterAllowance for Doubtful AccountsBad Debts ExpenseCashSales RevenueNo Entry | fill in the blank 012db8ff903300f_7 | Allowance for Doubtful AccountsBad Debts ExpenseNotes PayableNotes ReceivableSales RevenueNo Entry | fill in the blank 012db8ff903300f_9 | fill in the blank 012db8ff903300f_10 | |||||
| Allowance for Doubtful AccountsBad Debts ExpenseNotes PayableNotes ReceivableSales RevenueNo Entry | fill in the blank 012db8ff903300f_12 | Accounts Receivable - M. BaxterAllowance for Doubtful AccountsBad Debts ExpenseNotes PayableSales RevenueNo Entry | fill in the blank 012db8ff903300f_14 | fill in the blank 012db8ff903300f_15 | Accounts Receivable - M. BaxterAllowance for Doubtful AccountsBad Debts ExpenseNotes PayableSales RevenueNo Entry | fill in the blank 012db8ff903300f_17 | Allowance for Doubtful AccountsBad Debts ExpenseNotes PayableNotes ReceivableSales RevenueNo Entry | fill in the blank 012db8ff903300f_19 | fill in the blank 012db8ff903300f_20 | |||||
| Accounts Receivable - M. BaxterAllowance for Doubtful AccountsBad Debts ExpenseNotes PayableSales RevenueNo Entry | fill in the blank 012db8ff903300f_22 | Allowance for Doubtful AccountsBad Debts ExpenseNotes PayableNotes ReceivableSales RevenueNo Entry | fill in the blank 012db8ff903300f_24 | fill in the blank 012db8ff903300f_25 | Accounts Receivable - M. BaxterAllowance for Doubtful AccountsBad Debts ExpenseNotes PayableSales RevenueNo Entry | fill in the blank 012db8ff903300f_27 | Allowance for Doubtful AccountsBad Debts ExpenseNotes PayableNotes ReceivableSales RevenueNo Entry | fill in the blank 012db8ff903300f_29 | fill in the blank 012db8ff903300f_30 | |||||
The effect of the adjustment on December 31.
| Activity | OperatingInvestingFinancing |
| Accounts | Interest Receivable Increase, Interest Revenue IncreaseInterest Receivable Increase, Interest Revenue DecreaseInterest Receivable Decrease, Interest Revenue IncreaseInterest Receivable Decrease, Interest Revenue Decrease |
| Statement(s) | Balance Sheet onlyIncome Statement onlyBalance Sheet and Income Statement |
How does this entry affect the accounting equation? If a financial statement item is not affected, select "No Entry" and leave the amount box blank. If the effect on a financial statement item is negative, i.e, a decrease, be sure to enter the answer with a minus sign.
| Balance Sheet | Income Statement | |||||||||||||
| Stockholders' | Net | |||||||||||||
| Assets | = | Liabilities | + | Equity | Revenues | Expenses | = | Income | ||||||
| CashInterest PayableInterest ReceivableInterest RevenueNotes ReceivableNo Entry | fill in the blank 2a44970acfbe065_2 | Accounts PayableInterest PayableInterest ReceivableInterest RevenueNotes ReceivableNo Entry | fill in the blank 2a44970acfbe065_4 | fill in the blank 2a44970acfbe065_5 | Accounts PayableInterest PayableInterest ReceivableInterest RevenueNotes ReceivableNo Entry | fill in the blank 2a44970acfbe065_7 | CashInterest PayableInterest ReceivableInterest RevenueNotes ReceivableNo Entry | fill in the blank 2a44970acfbe065_9 | fill in the blank 2a44970acfbe065_10 | |||||
The effect of the transaction on January 31.
| Activity | OperatingInvestingFinancing |
| Accounts | Cash Increase, Interest Receivable Decrease, Note Receivable Decrease, Interest Revenue IncreaseCash Increase, Interest Receivable Decrease, Note Receivable Decrease, Interest Revenue DecreaseCash Decrease, Interest Receivable Decrease, Note Receivable Decrease, Interest Revenue IncreaseCash Decrease, Interest Receivable Decrease, Note Receivable Decrease, Interest Revenue Decrease |
| Statement(s) | Balance Sheet onlyIncome Statement onlyBalance Sheet and Income Statement |
How does this entry affect the accounting equation? If a financial statement item is not affected, select "No Entry" and leave the amount box blank. If the effect on a financial statement item is negative, i.e, a decrease, be sure to enter the answer with a minus sign.
| Balance Sheet | Income Statement | |||||||||||||
| Stockholders' | Net | |||||||||||||
| Assets | = | Liabilities | + | Equity | Revenues | Expenses | = | Income | ||||||
| CashGain on Notes ReceivableInterest RevenueNotes PayableNote RevenueNo Entry | fill in the blank cfa81ffb805d009_2 | CashInterest PayableLoss on Notes ReceivableNotes ReceivableNote RevenueNo Entry | fill in the blank cfa81ffb805d009_4 | fill in the blank cfa81ffb805d009_5 | CashGain on Notes ReceivableInterest RevenueNotes PayableNote RevenueNo Entry | fill in the blank cfa81ffb805d009_7 | CashInterest PayableLoss on Notes ReceivableNotes ReceivableNote RevenueNo Entry | fill in the blank cfa81ffb805d009_9 | fill in the blank cfa81ffb805d009_10 | |||||
| Gain on Notes ReceivableInterest ExpenseInterest ReceivableNotes PayableNote RevenueNo Entry | fill in the blank cfa81ffb805d009_12 | CashInterest PayableLoss on Notes ReceivableNotes ReceivableNote RevenueNo Entry | fill in the blank cfa81ffb805d009_14 | fill in the blank cfa81ffb805d009_15 | Gain on Notes ReceivableInterest ExpenseInterest ReceivableNotes PayableNote RevenueNo Entry | fill in the blank cfa81ffb805d009_17 | CashInterest PayableLoss on Notes ReceivableNotes ReceivableNote RevenueNo Entry | fill in the blank cfa81ffb805d009_19 | fill in the blank cfa81ffb805d009_20 | |||||
| CashInterest PayableLoss on Notes ReceivableNotes ReceivableNote RevenueNo Entry | fill in the blank cfa81ffb805d009_22 | Gain on Notes ReceivableInterest ExpenseInterest ReceivableNotes PayableNote RevenueNo Entry | fill in the blank cfa81ffb805d009_24 | fill in the blank cfa81ffb805d009_25 | Gain on Notes ReceivableInterest ExpenseInterest ReceivableNotes PayableNote RevenueNo Entry | fill in the blank cfa81ffb805d009_27 | CashInterest PayableLoss on Notes ReceivableNotes ReceivableNote RevenueNo Entry | fill in the blank cfa81ffb805d009_29 | fill in the blank cfa81ffb805d009_30 | |||||
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:
- Baxter was required to do this to avoid bankruptcy.
- Baxter would want to reestablish their good credit standing with supplier in order to purchase products in the future.
- Baxter's owner could not bear the guilt of nonpayment.
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Financial Accounting
Authors: Walter B. Meigs, A. N. Mosich, Robert F. Meigs
2nd Edition
0070412901, 978-0070412903
