Part A.

Entries for Bad Debt Expense Under the Direct Write-Off and Allowance Methods

Seaforth International wrote off the following accounts receivable as uncollectible for the year ending December 31:

Customer		Amount
Kim Abel		$21,550
Lee Drake		33,925
Jenny Green		27,565
Mike Lamb		19,460
	Total	$102,500

The company prepared the following aging schedule for its accounts receivable on December 31:

Aging Class (Number of Days Past Due)	Receivables Balance on December 31			Estimated Percent of Uncollectible Accounts
0-30 days		$715,000		1%
31-60 days		310,000		2
61-90 days		102,000		15
91-120 days		76,000		30
More than 120 days		97,000		60
Total receivables		$1,300,000

a. Journalize the write-offs under the direct write-off method. If an amount box does not require an entry, leave it blank.

b. Journalize the write-offs and the year-end adjusting entry under the allowance method, assuming that the allowance account had a beginning credit balance of $95,000 on January 1 and the company uses the analysis of receivables method. For a compound transaction, if an amount box does not require an entry, leave it blank.

Write-off
Adjustment

c. How much higher (lower) would Seaforth International's net income have been under the allowance method than under the direct write-off method? $

Part B.

Spring Designs & Decorators issued a 180-day, 5% note for $82,600, dated April 13 to Jaffe Furniture Company on account.

Required:

A.	Determine the due date of the note.
B.	Determine the maturity value of the note. Assume a 360-day year when calculating interest.
C.	Journalize the entries to record the following: (1) receipt of the note by Jaffe Furniture and (2) receipt of payment of the note at maturity. Refer to the Chart of Accounts for exact wording of account titles.

CHART OF ACCOUNTS Jaffe Furniture Company General Ledger

	ASSETS
110	Cash
111	Petty Cash
121	Accounts Receivable-Spring Designs & Decorators
129	Allowance for Doubtful Accounts
132	Notes Receivable
141	Merchandise Inventory
145	Office Supplies
146	Store Supplies
151	Prepaid Insurance
181	Land
191	Store Equipment
192	Accumulated Depreciation-Store Equipment
193	Office Equipment
194	Accumulated Depreciation-Office Equipment

	LIABILITIES
210	Accounts Payable
211	Salaries Payable
213	Sales Tax Payable
214	Interest Payable
215	Notes Payable

	EQUITY
310	Owner, Capital
311	Owner, Drawing
312	Income Summary

	REVENUE
410	Sales
610	Interest Revenue

	EXPENSES
510	Cost of Merchandise Sold
520	Sales Salaries Expense
521	Advertising Expense
522	Depreciation Expense-Store Equipment
523	Delivery Expense
524	Repairs Expense
529	Selling Expenses
530	Office Salaries Expense
531	Rent Expense
532	Depreciation Expense-Office Equipment
533	Insurance Expense
534	Office Supplies Expense
535	Store Supplies Expense
536	Credit Card Expense
537	Cash Short and Over
538	Bad Debt Expense
539	Miscellaneous Expense
710	Interest Expense

1. Determine the due date of the note.

2. Determine the maturity value of the note. Assume a 360-day year when calculating interest.

Part C.

The following selected transactions were completed by Fasteners Inc. Co., a supplier of buttons and zippers for clothing:

20Y3
Nov.	21	Received from McKenna Outer Wear Co., on account, a $48,000, 60-day, 9% note dated November 21 in settlement of a past due account.
Dec.	31	Recorded an adjusting entry for accrued interest on the note of November 21.
20Y4
Jan.	20	Received payment of note and interest from McKenna Outer Wear Co.

CHART OF ACCOUNTS

Fasteners Inc. Co.

General Ledger

	ASSETS
110	Cash
111	Petty Cash
121	Accounts Receivable-McKenna Outer Wear Co.
129	Allowance for Doubtful Accounts
131	Interest Receivable
132	Notes Receivable
141	Merchandise Inventory
145	Office Supplies
146	Store Supplies
151	Prepaid Insurance
181	Land
191	Store Equipment
192	Accumulated Depreciation-Store Equipment
193	Office Equipment
194	Accumulated Depreciation-Office Equipment

	LIABILITIES
210	Accounts Payable
211	Salaries Payable
213	Sales Tax Payable
214	Interest Payable
215	Notes Payable

	EQUITY
310	Owner, Capital
311	Owner, Drawing
312	Income Summary

	REVENUE
410	Sales
610	Interest Revenue

	EXPENSES
510	Cost of Merchandise Sold
520	Sales Salaries Expense
521	Advertising Expense
522	Depreciation Expense-Store Equipment
523	Delivery Expense
524	Repairs Expense
529	Selling Expenses
530	Office Salaries Expense
531	Rent Expense
532	Depreciation Expense-Office Equipment
533	Insurance Expense
534	Office Supplies Expense
535	Store Supplies Expense
536	Credit Card Expense
537	Cash Short and Over
538	Bad Debt Expense
539	Miscellaneous Expense
710	Interest Expense