a. What is the journal entry to record the January 29, 2016 reclassification of the remainder to accounts receivable? c. What is the balance of Notes Payable on December 31, 2014?
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At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
Black Corporation has entered into a long-term assignment agreement with a finance company. Under the terms of this agreement, Black receives 80% of the value of all accounts assigned and is charged a 1% service charge which is based upon the actual peso amount of cash received. Additionally, the finance company charges Black 12% annual interest on the outstanding loan. The following selected transactions relate to this agreement:
December 1, 2014 -
December 11, 2014 - A sales return of P1,000 on an assigned account is allowed by Black.
December 31, 2014 - Collections are made on P86,000 of assigned accounts. This amount and 1 month's interest on the outstanding loan are remitted to the finance company. (For simplicity, compute interest to the nearest month).
January 29, 2016 - P60,000 of assigned accounts are collected and the remainder of the loan is repaid.
a. What is the
c. What is the balance of Notes Payable on December 31, 2014?
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