Mastery Problem: Receivables

Fan-Tastic Sports Gear Inc.

You have just been hired as the accountant for Fan-Tastic Sports Gear Inc., a wholesaler of sporting goods and apparel. The previous accountant left abruptly in late December, 20Y7, and an accounting intern has been drafting the journal entries since January. You are examining the accounting records before finalizing the journal entries for the first quarter of 20Y8. The following journal shows some of the accounts receivable transactions that you are reviewing.

Journal

Date Description Debit Credit

Jan. 17 Sales 9,700

Bad Debt Expense 9,700

17 Bad Debt Expense 9,700

Accounts Receivable-CJs Sports Corp. 9,700

21 Cash 10,600

Bad Debt Expense 2,300

Accounts Receivable-Four Seasons Sportswear Co. 12,900

Feb. 15 Accounts Receivable-Healthy Running Inc. 3,000

Bad Debt Expense 500

Sales 3,500

Mar. 4 Accounts Receivable-Four Seasons Sportswear Co. 2,300

Bad Debt Expense 2,300

4 Cash 2,300

Bad Debt Expense 2,300

13 Cash 5,540

Accounts Receivable-Barbs Best Gear 5,540

31 Bad Debt Expense 20,870

Accounts Receivable-Healthy Running Inc. 5,250

Accounts Receivable-The Locker Room 4,100

Accounts Receivable-CJs Sports Corp. 2,780

Accounts Receivable-Get Your Gear Inc. 7,050

Accounts Receivable-Ready-2-Go

Note Receivable

In the trial balance for March, you see that Notes Receivable-Fast Feet Co. has a negative balance of $105, which would seem to indicate that Fast Feet paid too much. Looking back through the journal entries for March, you find that on March 19 the accounting intern recorded receipt of $3,605 in payment of this note receivable. Further investigation reveals that on November 19, 20Y7, this note receivable was received from Fast Feet Co. for $3,500. You can find no additional information about this note in the accounting records. Assume a 360 day year.

Using the preceding information, compute the term and the interest rate of the note receivable from Fast Feet.

1. Term of the note: days_______

2. Interest rate of the note: %________

Jan. 17 Jan. 21 Feb. 15 DO COD CD DO DO ON D COD DO DO DO DO Mar. 4 Mar. 4 Mar. 13 Mar. 31 100001 Jan. 17 Jan. 21 Feb. 15 DO COD CD DO DO ON D COD DO DO DO DO Mar. 4 Mar. 4 Mar. 13 Mar. 31 100001