March 17 Accounts receivable of $3,700 were written off as uncollectible. The company uses the allowance method. March 30 Loaned an officer of the company $45,000 and received a note requiring principal and interest at 8% to be paid on March 30, 2025. May 30 Discounted the $45,000 note at a local bank. The bank’s discount rate is 9%. The note was discounted without recourse and the sale criteria are met. June 30 Sold merchandise to the Blankenship Company for $32,000. Terms of the sale are 210/210 , n30/n30 . Weldon uses the gross method to account for cash discounts. July 8 The Blankenship Company paid its account in full. August 31 Sold stock in a nonpublic company with a book value of $7,000 and accepted a $8,200 noninterest-bearing note with a discount rate of 9%. The $8,200 payment is due on February 28, 2025. The stock has no ready market value. December 31 Weldon estimates that the allowance for uncollectible accounts should have a balance in it at year-end equal to 3% of the gross accounts receivable balance of $990,000. The allowance had a balance of $32,000 at the start of 2024. What is the cash received on the discounted note (May entry) and loss on sale of note? What is the gain on sale of investment (August entry) and discount on notes receivable? What is the entry for bad debt expense (December) and allowance for uncollectible accounts?

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter6: Cash And Receivables

Section: Chapter Questions

Problem 14RE: On June 1, Phillips Corporation sold, with recourse, a note receivable from a customer to a bank....

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March 17	Accounts receivable of $3,700 were written off as uncollectible. The company uses the allowance method.
March 30	Loaned an officer of the company $45,000 and received a note requiring principal and interest at 8% to be paid on March 30, 2025.
May 30	Discounted the $45,000 note at a local bank. The bank’s discount rate is 9%. The note was discounted without recourse and the sale criteria are met.
June 30	Sold merchandise to the Blankenship Company for $32,000. Terms of the sale are 210/210 , n30/n30 . Weldon uses the gross method to account for cash discounts.
July 8	The Blankenship Company paid its account in full.
August 31	Sold stock in a nonpublic company with a book value of $7,000 and accepted a $8,200 noninterest-bearing note with a discount rate of 9%. The $8,200 payment is due on February 28, 2025. The stock has no ready market value.
December 31	Weldon estimates that the allowance for uncollectible accounts should have a balance in it at year-end equal to 3% of the gross accounts receivable balance of $990,000. The allowance had a balance of $32,000 at the start of 2024.