Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Midtown Distribution sells a variety of merchandise to retail stores on account, but it insists that any customer who fails to pay an invoice when

Midtown Distribution sells a variety of merchandise to retail stores on account, but it insists that any customer who fails to pay an invoice when due must replace their account receivable with an interest-bearing note. The company adjusts and closes its accounts at December 31. Among the transactions relating to notes receivable were the following. Nov. 1 Received from a customer (Sampson Co.) a 9-month, 12 percent note for $30,000 in settlement of an account receivable due today. Aug. 1 Collected in full the 9-month, 12 percent note receivable from Sampson Co., including interest. Instructions a. Prepare journal entries (in general journal form) to record: (1) the receipt of the note on November 1; (2) the adjustment for interest on December 31; and (3) the collection of principal and interest on August 1. (To better illustrate the allocation of interest revenue between accounting periods, we will assume Midtown makes adjusting entries only at year-end.) b. Assume that instead of paying the note on August 1, the customer (Sampson Co.) had defaulted. Give the journal entry by Midtown to record the default. Assume that Sampson Co. has sufficient resources that the note eventually will be collected.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Lean Audit The 20 Keys To World Class Operations A Health Check For Factory And Office

Authors: Joerg Muenzing

1st Edition

1514817829, 978-1514817827

More Books

Students also viewed these Accounting questions