Journal entries:
1.
To prepare: Journal entry.
Explanation of Solution
Date | Account Title and Explanation | Post ref | Debit ($) |
Credit ($) |
Dec 16 | Notes receivable – Danny Todd | 10,800 | ||
10,800 | ||||
(To record conversion of accounts receivable into notes receivable.) |
Table (1)
• Notes receivable are classified under current assets in
• Accounts receivable account is classified under current assets in balance sheet and credited with the conversion of accounts receivable account into notes receivable.
Date | Account Title and Explanation | Post ref | Debit ($) |
Credit ($) |
Dec 31 | Accrued interest | 36 | ||
Interest revenue | 36 | |||
(To record accrued interest.) |
Table (2)
• Accrued interest is classified under current assets in balance sheet and debited with the increase in accrued interest account.
• Interest revenue is classified under revenue in income statement account. This account will be credited with the increase in interest revenue.
Date | Account Title and Explanation | Post ref | Debit ($) |
Credit ($) |
Feb 14 | Cash | 10943 | ||
Interest revenue | 107 | |||
Interest receivable | 36 | |||
Notes receivable- D. Todd | 10800 | |||
(To record payment of principal and interest from Todd.) |
Table (3)
• Cash is classified under current assets in balance sheet. With the receipt of cash, cash account will be increased and therefore will be debited.
• Interest revenue is classified under revenue in income statement account. This account will be credited with the increase in interest revenue.
• Interest receivable account is classified under current assets in balance sheet and credited with the transfer of amount to cash account as interest is received in cash.
• Notes receivable is classified under current assets account and it will be credited with the transfer of balance from notes receivable account to cash account.
Date | Account Title and Explanation | Post ref | Debit ($) |
Credit ($) |
Mar 02 | Notes receivable – Midnight Co. | 6,100 | ||
Accounts receivable – Midnight Co. | 6,100 | |||
(To record conversion of accounts receivable into notes receivable.) |
Table (4)
• Notes receivable are classified under current assets in balance sheet and debited with the conversion of accounts receivable account into notes receivable, this account will be debited.
• Accounts receivable account is classified under current assets in balance sheet and credited with the conversion of accounts receivable account into notes receivable.
Date | Account Title and Explanation | Post ref | Debit ($) |
Credit ($) |
Mar 17 | Notes receivable – Ava Privet | 2,400 | ||
Accounts receivable – Ava Privet | 2,400 | |||
(To record conversion of accounts receivable into notes receivable.) |
Table (5)
• Notes receivable are classified under current assets in balance sheet and debited with the conversion of accounts receivable account into notes receivable, this account will be debited.
• Accounts receivable account is classified under current assets in balance sheet and credited with the conversion of accounts receivable account into notes receivable.
Date | Account Title and Explanation | Post ref | Debit ($) |
Credit ($) |
April 16 | Accounts receivable – Ava Privet | 2,414 | ||
Interest revenue | 14 | |||
Notes receivable- Ava Privet | 2,400 | |||
(To record Note dishonored by Privet.) |
Table (6)
• Accounts receivable is classified under current asset account and this account will be debited with the increase in balance of accounts receivable.
• Interest revenue is classified under revenue in income statement account. This account will be credited with the increase in interest revenue.
• Notes receivable is classified under current assets account and it will be credited with the transfer of balance from notes receivable account to cash account.
Date | Account Title and Explanation | Post ref | Debit ($) |
Credit ($) |
May 31 | Accounts receivable – Midnight Co. | 6,220 | ||
Interest revenue | 120 | |||
Notes receivable- Midnight Co. | 6,100 | |||
(To record dishonored note plus interest charged to Midnight Co’s accounts receivable..) |
Table (7)
• Accounts receivable is classified under current asset account and this account will be debited with the increase in balance of accounts receivable.
• Interest revenue is classified under revenue in income statement account. This account will be credited with the increase in interest revenue.
• Notes receivable is classified under current assets account and it will be credited with the transfer of balance from notes receivable account to cash account.
Date | Account Title and Explanation | Post ref | Debit ($) |
Credit ($) |
Jul 16 | Cash | 6,282 | ||
Interest revenue | 62 | |||
Accounts receivable – Midnight Co. | 6,220 | |||
(To record payment received from Midnight Co.) |
Table (8)
• Cash is classified under current assets in balance sheet. With the receipt of cash, cash account will be increased and therefore will be debited.
• Interest revenue is classified under revenue in income statement account. This account will be credited with the increase in interest revenue.
• Accounts receivable account is classified under current assets in balance sheet and credited with the conversion of accounts receivable account into notes receivable.
Date | Account Title and Explanation | Post ref | Debit ($) |
Credit ($) |
Aug 7 | Notes receivable – Mulan Co. | 7,450 | ||
Accounts receivable – Mulan Co. | 7,450 | |||
(To record conversion of accounts receivable into notes receivable.) |
Table (9)
• Notes receivable are classified under current assets in balance sheet and debited with the conversion of accounts receivable account into notes receivable, this account will be debited.
• Accounts receivable account is classified under current assets in balance sheet and credited with the conversion of accounts receivable account into notes receivable.
Date | Account Title and Explanation | Post ref | Debit ($) |
Credit ($) |
Sep 3 | Notes receivable – Noah Carson | 2,100 | ||
Accounts receivable – Noah Carson. | 2,100 | |||
(To record conversion of accounts receivable into notes receivable.) |
Table (10)
• Notes receivable are classified under current assets in balance sheet and debited with the conversion of accounts receivable account into notes receivable, this account will be debited.
• Accounts receivable account is classified under current assets in balance sheet and credited with the conversion of accounts receivable account into notes receivable.
Date | Account Title and Explanation | Post ref | Debit ($) |
Credit ($) |
Nov 2 | Accounts receivable – Noah Carson | 2,135 | ||
Interest revenue | 35 | |||
Notes receivable- Noah Carson. | 2,100 | |||
(To record payment received from Noah Carson.) |
Table (11)
• Accounts receivable is classified under current asset account and this account will be debited with the increase in balance of accounts receivable.
• Interest revenue is classified under revenue in income statement account. This account will be credited with the increase in interest revenue.
• Notes receivable is classified under current assets account and it will be credited with the transfer of balance from notes receivable account to cash account.
Date | Account Title and Explanation | Post ref | Debit ($) |
Credit ($) |
Nov 5 | Cash | 7,634 | ||
Interest revenue | 184 | |||
Notes receivable - Mulan. | 7,450 | |||
(To record payment received from Mulan.) |
Table (12)
• Cash is classified under current assets in balance sheet. With the receipt of cash, cash account will be increased and therefore will be debited.
• Interest revenue is classified under revenue in income statement account. This account will be credited with the increase in interest revenue.
• Notes receivable is classified under current assets account and it will be credited with the transfer of balance from notes receivable account to cash account.
Date | Account Title and Explanation | Post ref | Debit ($) |
Credit ($) |
Dec 1 | Allowances for doubtful accounts | 2,414 | ||
Accounts receivable – A Privet | 2,414 | |||
(To record Privet account written off against allowance for doubtful accounts.) |
Table (13)
• Allowance for doubtful accounts is a contra asset account which represents the amount not likely to be recovered. Writing off the privet account will reduce the balance of allowance for doubtful accounts and therefore, this account will be debited.
• Accounts receivable account is classified under current assets in balance sheet and credited with the conversion of accounts receivable account into notes receivable.
2.
To identify: Reporting required when business pledges its receivables for a loan and the loan is still outstanding at the end of the period.
Explanation of Solution
• In the given case, the company is liable to disclose the fact that it has pledged its receivables for a loan which is still outstanding at the end of the period.
• As per Full Disclosure Principle of the accounting, a company is required to disclose all such information which has a significant impact on the financial statement.
• This information is necessary to protect the interest of the stake holders and to give true and fair view of the financial statement.
Hence, the company is required to disclose its information under full disclosure principle of the accounting.
Want to see more full solutions like this?
Chapter 9 Solutions
FUND.ACCT.PRIN -ONLINE ONLY >I<
- AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
- Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSONIntermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill EducationFinancial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education