Objective: To record a comprehensive series of transactions for receivables, payables, and bad debts, post to selected accounts, and show receivables on the balance sheet

Lopez Company uses the allowance method and the income statement approach to account for bad debts. The following selected transactions occurred during 2011:

2011

Jan.

15 Purchased merchandise on account from Gleason Co., $2,400; terms, 2/10, n/30.

18 Received a 90-day, 11% note from Bill Willis for his December account balance of $2,700.

28 Discounted Bill Willis's note of January 18 at 10%.

Feb.

6 Collected a December balance from Alden Co., $1,180, less a 1% discount.

14 Received a time extension from Gleason Co., giving a 30-day, 12% note for the purchase of January 15.

22 Received cash for an $820 note with interest for 90 days at 8%.

Mar.

12 Wrote off the account of Ed Fisher, a customer, $575.

16 Paid our note due today to Gleason Co.

Apr.

18 Received notice that Bill Willis dishonored his note due today. Paid the bank the maturity value plus a $10 protest fee.

23 Sold merchandise to Ray Welch for $1,600; terms, 2/10, n/30.

May

23 Received a 120-day, 10% note from Ray Welch as a time extension on the sale of April 23.

June

17 Collected Bill Willis's overdue account with interest at 8% for 60 days.

July

28 Discounted our own 30-day, $950 note at 10% at our local bank.

Aug.

27 Paid our discounted note of July28.

Sep.

20 Ray Welch dishonored his note of May 23 due today.

Oct.

14 Ed Fisher, whose account was written off in March, paid what was owed.

Dec.

31 Recorded the adjusting entry for bad debt expense at 0.5% of credit sales of $490,000.

Directions:

1) Open the following general ledger accounts, and enter the balances as of January 1, 2011:

112 Accounts Receivable $ 52,650

112.1 Allowance for Doubtful Accounts 750 (debit)

113 Notes Receivable 2,170

211 Accounts Payable 44,640

212 Notes Payable 3,180

2) Record each of the transactions in general journal form, starting on page 1.

3) Post to the five accounts as you proceed.

4) Prepare the receivables section of the December 31, 2011, balance sheet after all posting is completed.

CHECK FIGURE: Total receivables(balance sheet)= $ 49, 498.33

Lopez Company Balance Sheet (Partial) December 31, 2011 Assets Current assets: Accounts receivable Less: Allowance for doubtful accounts Notes receivable Total receivables