
(1)
Accounts receivable refers to the amounts to be received within a short period from customers upon the sale of goods and services on account. In other words, accounts receivable are amounts customers owe to the business. Accounts receivable is an asset of a business.
To prepare: The
(1)

Explanation of Solution
- For Sales on February 28, 2018:
Date | Account Title and Explanation | Post Ref. |
Debit ($) |
Credit ($) |
February 28, 2018 | Notes Receivable | 10,000 | ||
Sales Revenue | 10,000 | |||
(To record the sales on account) |
Table (1)
- For Sales and receipt of noninterest bearing note on March 31, 2018:
Date | Account Title and Explanation | Post Ref. |
Debit ($) |
Credit ($) |
March 31, 2018 | Notes Receivable | 8,000 | ||
Sales Revenue (2) | 7,200 | |||
Discount (1) | 800 | |||
(To record the sales on account) |
Table (2)
Working Note:
Compute the amount of discount:
Compute the amount of Sales revenue:
- For Sales on April 3, 2018:
Date | Account Title and Explanation | Post Ref. |
Debit ($) |
Credit ($) |
April 3, 2018 | Accounts Receivable | 7,000 | ||
Sales Revenue | 7,000 | |||
(To record the sales on account) |
Table (3)
- For Cash collection from sales above on April 11:
Date | Account Title and Explanation | Post Ref. |
Debit ($) |
Credit ($) |
April 11, 2018 | Cash (4) | 6,860 | ||
Sales Discount (3) | 140 | |||
Accounts Receivable | 7,000 | |||
(To record the sales remittance) |
Table (4)
Working Note:
Compute the amount of discount:
The sale was made on April 3 and the payment is received on April 11. Hence, the customer is eligible for a sales discount of 2% (2/10 term).
Compute the amount of cash received from the customer:
- For Sales Returns on April – 17:
Date | Account Title and Explanation | Post Ref. |
Debit ($) |
Credit ($) |
April 17, 2018 | Sales Returns | 5,000 | ||
Accounts Receivable | 5,000 | |||
(To record the Sales Return at invoice price) |
Table (5)
- For Cost of Goods Sold – Sales Returns:
Date | Account Title and Explanation | Post Ref. |
Debit ($) |
Credit ($) |
Merchandised Inventory | 3,200 | |||
Cost of Goods Sold | 3,200 | |||
(To record the cost of goods sold) |
Table (6)
- April 30, 2018 – Discounting of Notes Receivable:
Date | Account Title and Explanation | Post Ref. |
Debit ($) | Credit ($) |
April 30, 2018 | Cash (6) | 49,500 | ||
Loss on Sale of Note Receivable (5) | 500 | |||
Notes Receivable | 50,000 | |||
(To record the discounting of note receivable) |
Table (7)
- June 30 - Accrual of Interest:
Date | Accounts title and explanation | Post Ref. | Debit ($) |
Credit ($) |
June 30, 2018 | Interest Receivable | 333 | ||
Interest revenue (7) | 333 | |||
(To record accrued interest) |
Table (8)
Working note:
Compute the amount of loss on sale of accounts receivable:
Compute the amount of cash to be received from sale of accounts receivable:
Compute the amount of interest accrued:
Principal = $10,000
Rate of interest = 10%
Period = 4 Months (February 28 to June 30)
- For Discounting of Notes Receivable on June 30:
Date | Account Title and Explanation | Post Ref. |
Debit ($) | Credit ($) |
June 30, 2018 | Cash (11) | 10,266 | ||
Loss on Sale of Note Receivable (Table 12) | 67 | |||
Notes Receivable | 10,000 | |||
Interest Receivable | 333 | |||
(To record the discounting of note receivable) |
Table (9)
Working note:
Compute the amount of interest on maturity:
Principal = $10,000
Rate of interest = 10%
Period = 7 Months
Compute the maturity value:
Compute the amount discount on discounting the note:
Compute the amount of cash proceeds:
Compute the loss on sale of notes receivable:
Face value of Notes Receivable | $10,000 |
Add: Interest Receivable | 333 |
Less: Cash Proceeds | (10,266) |
Loss on Sale of Investments | $67 |
Table (10)
For September 30 – No Entry is required.
(2)
To prepare: Year-end
(2)

Explanation of Solution
Date | Account Title and Explanation | Post Ref. |
Debit ($) | Credit ($) |
December 31, 2018 | Discount | 600 | ||
Interest Revenue (12) | 600 | |||
(To record the discounting of note receivable) |
Table (11)
Compute the amount of interest:
Principal = $8,000
Rate of interest = 10%
Period = 9 Months (March 31 to December 31)
(3)
To prepare: The effect of all of the above transactions on the net income of 2018
(3)

Explanation of Solution
The effect of all of the above transactions on the net income of 2018 is prepared as follows:
Date | Income Increase (Decrease) | Reasons |
February 28 | $10,000 | Sales Revenue Increases the Net Income |
March 31 | 7,200 | Sales Revenue Increases the Net Income |
April 3 | 7,000 | Sales Revenue Increases the Net Income |
April 11 | (140) | Sales Discount Decreases the Net Income |
April 17 | (5,000) | Sales Returns Decreases the Net Income |
April 17 | 3,200 | Cost of Goods Sold Increases the Net Income |
April 30 | (500) | Loss on Sale of Accounts Receivable Decreases the Net Income |
June 30 | 333 | Interest Revenue Increases the Net Income |
June 30 | (67) | Loss on Sale of Accounts Receivable Decreases the Net Income |
December 31 | 600 | Interest Revenue Increases the Net Income |
Total | $22,626 |
Table (12)
Want to see more full solutions like this?
Chapter 7 Solutions
Intermediate Accounting
- For which of the following would year-end accrual of a current liability be optional? a. Current portion of a long-term lease obligation that comes due next year b. A declared property dividend c. Sick pay benefits that accumulate but do not vest d. Short-term debt that is being refinanced on a long-term basisarrow_forwardQuick answer of this accounting questionsarrow_forwardSwifty Supply Co. has the following transactions related to notes receivable during the last 2 months of 2027. The company does not make entries to accrue interest except at December 31. Nov. 1 Loaned $30,000 cash to Manny Lopez on a 12 month, 10% note. Dec. 11 Sold goods to Ralph Kremer, Inc., receiving a $85,500, 90-day, 8% note. 16 Received a $87,840, 180 day. 10% note to settle an open account from Joe Fernetti. 31 Accrued interest revenue on all notes receivable. (a) Journalize the transactions for Swifty Supply Co. (Ignore entries for cost of goods sold.) (Credit account titles are automatically indented when amount is entered. Do not indent manually. Use 360 days for cal in the order presented in the problem. List all debit entries before credit entries.) Date Account Titles and Explanation Debit Creditarrow_forward
- Hi expert please give me answer general accounting questionarrow_forwardHoward James started a business in 2011 in Jamaica and has been operating in the wholesale/retail industries, where he buys and sells household items to the local market. In 2012, he expanded his business operations and opened two other businesses in Trinidad and Tobago and Antigua and Barbuda, respectively. The annual sales of the respective businesses in 2015 are: Jamaica: J$3,000.00 Trinidad and Tobago: TT$251,000.00 Antigua and Barbuda: $299.00 Mr. James failed to register his business for VAT/GCT as specified by the respective Sales Tax Acts and Regulations. He stated that there is no need for his businesses to be registered because their sales are under the VAT thresholds and thus not required to be registered. a) You are to advise Mr. James if his decision not to register his businesses is justifiable. b) Search the respective VAT Acts for the 3 countries and advise Mr. James of the benefits of being a registered taxpayer; also the penalties for not registering for VAT/GCT.arrow_forwardGet correct answer general accounting questionarrow_forward
- ABF's metal spare parts manufacturing company uses the customised production method by attributing the GST to the products it produces with the help of predetermined attribution coefficients. The processing of metal parts is carried out in two production departments: the Cutting and Drilling department, and the Assembly department. The GIS attribution coefficients for the two departments are based on the operating hours of machines and the cost of direct work respectively. At the beginning of the year, the following budgets were implemented: Cutting and Drilling Department Assembly Department Direct Labor Costs (in euros) 1.320.000 2.000.000 G.B.E. (in euros) 4.800.000 2.400.000 Machinery Operating Hours 80.000 5.000 Direct Work Hours 27.000 12.000 Requested: To calculate the coefficient of attribution of the General Secretariat that will be used in each department. (4 units) To determine the production cost per unit for order 158 which…arrow_forwardPLEASE HELP. I HAVE PROVIDED THE DROPDOWN OPTIONSarrow_forwardThe difference between the balance in a company's cash account and its bank statement is documented in the __________ of the bank statement.arrow_forward
- Cornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage LearningIntermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage LearningFinancial Accounting: The Impact on Decision Make...AccountingISBN:9781305654174Author:Gary A. Porter, Curtis L. NortonPublisher:Cengage Learning


