Question

Jan. 3 Loaned $21,600 cash to Trina Gelhaus, receiving a 90-day, 7% note. Feb. 10 Sold merchandise on account to Bradford & Co., $26,400. The cost of the goods sold was $15,840. 13 Sold merchandise on account to Dry Creek Co., $63,600. The cost of goods sold was $57,240. Mar. 12 Accepted a 60-day, 8% note for $26,400 from Bradford & Co. on account. 14 Accepted a 60-day, 9% note for $63,600 from Dry Creek Co. on account. Apr. 3 Received the interest due from Trina Gelhaus and a new 120-day, 9% note as a renewal of the loan of January 3. (Record both the debit and the credit to the notes receivable account.) May 11 Received from Bradford & Co. the amount due on the note of March 12. 13 Dry Creek Co. dishonored its note dated March 14. July 12 Received from Dry Creek Co. the amount owed on the dishonored note, plus interest for 60 days at 12% computed on the maturity value of the note. Aug. 1 Received from Trina Gelhaus the amount due on her note of April 3. Oct. 5 Sold merchandise on account, terms 2/10, n/30, to Halloran Co., $12,500. Record the sale net of the 2% discount. The cost of the goods sold was $7,500. 15 Received from Halloran Co. the amount of the invoice of October 5, less 2% discount.

Answer 1

Answer:

Journal Entries

Jan 03 Debit Note Receivable $21,600 Credit Bank $21,600

Feb 10 Debit Accounts Receivable $26,400 Credit Revenue $26,400

           Debit Cost of goods sold $15,840 Credit Inventory $15,840

Feb 13 Debit Accounts Receivable $63,600 Credit Revenue $63,600

           Debit Cost of goods sols $57,240 Credit Inventory $57,240

Mar 12 Debit Note Receivable $26,400 Credit Bank $26,400

Mar 14 Debit Note Receivable $63,600 Credit Bank $63,600

Apr 03 Debit Bank $373 Credit Interest income $373

           Debit Bank $21,600 Credit Note Receivable(90 days7%) $21,600

          Debit Note receivable(120 day 9%) $21,600 Credit Bank $21,600

May 11 Debit Bank $26,747 Credit Interest income $347 Credit Note                    Receivable $26,400

Jul 12 Debit Bank $67,087 Credit Interest income $3,487 Credit Note Receivable $63,600

Aug 01 Debit Bank $22,239 Credit Interest Income $639 Credit Note Receivable $21,600

Oct 05 Debit Accounts Receivable $12,250 Debit Trade Discount $250 Credit Revenue $12,500

           Debit Cost of goods sold $7,500 Credit Inventory $7,500

Oct 15 Debit Bank $12,250 Credit Accounts Receivable $12,250

Explanation:

The Question is incomplete but the natures shows it requires Journal entries

April 03 Interest = 21600 * 7% * 90/365 = $372.82

The new note leads to cancellation of the old terms and loans therefore we need to reverse the entry by cancelling the 90 day and recognize a new loan with new terms (9% 120 day) of same amount.

May 11 interest = 26400*8%*60/365 = $347

July 12 Interest = 63600*9%*60/365 = $941

Maturity value = 941 + 63600 = $64541 *12%*120/365 =$2,546

Total interest = 2546+941 =$3,487

Dry Greek has missed a payment has the interest of 12% penalty and the 120 days of interest due.

Aug 01 Interest = 21600 *9% * 120/365 =

Oct 15 The 2% discount was already deducted as the amount for accounts receivable was net discount already. We can not give same discount twice.