RECEIVABLE FINANCING REQUIRED: 1. At what amount on the current assets section of the December 31, 2021 statement of financial position will the trade notes receivable be carried? 2. What amount of loss on notes receivable discounting should be reported in the 2021 statement of comprehensive income of the company? 3. Based on the ledger account presented, what amount of interest income should be accrued at December 31, 2021?
RECEIVABLE FINANCING REQUIRED: 1. At what amount on the current assets section of the December 31, 2021 statement of financial position will the trade notes receivable be carried? 2. What amount of loss on notes receivable discounting should be reported in the 2021 statement of comprehensive income of the company? 3. Based on the ledger account presented, what amount of interest income should be accrued at December 31, 2021?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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.
Question
Transcribed Image Text:RECEIVABLE FINANCING
REQUIRED:
1. At what amount on the current assets section of the December 31, 2021 statement of financial position
will the trade notes receivable be carried?
2. What amount of loss on notes receivable discounting should be reported in the 2021 statement of
comprehensive income of the company?
3. Based on the ledger account presented, what amount of interest income should be accrued at December
31, 2021?
Transcribed Image Text:During your audit of Russ' Company for the year ended December 31, 2021, you find the following account.
Notes Receivable
Date
Sept 1
Oct
Particulars
Brook, 20%, due in 3 months
Brad Co., 24% due in 2 months
Discounted Brook note at 25%
Debit
80,000
Credit
1
300,000
1
80,000
Nov
1
Beal, 24% due in 13 months
600,000
30
Deni Co., no interest, due in 1 year
500,000
30
Discounted Deni note at 18%
500,000
Dec
1
Gafford, 18%, due in 5 months
900,000
Scott, President, 12% due in 3 months
(for cash loan given to Scott)
1,200,000
All notes are trade notes unless otherwise specified. The Brook note was paid on December 1 as per notification
received from the bank. The Brad Co. note was dishonored on the due date but the legal department has assured
management of its full collectability.
The company, with your concurrence, will treat the discounting as a conditional sale of notes receivable.
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