Fundamental Accounting Principals, 18th Edition
Wild, Larson, Chiappetta, McGraw-Hill Irwin
Problem: Analyzing and journalizing notes receivable transactions.
The following transactions are fro Ohlmeyer Company.
2007
Dec. 16 Accepted a $10,800, 60-day, 8% note dated this day in granting Danny Todd a time extension on his past-due account receivable.
31 Made an adjusting entry to record the accrued interest on the Todd note.
2008
Feb. 14 Received Todd’s payment of principal and interest on the note dated December 16.
Mar. 2 Accepted a $6,120, 8%, 90-day note dated this day in granting a time extension on the past-due account receivable from Midnight Co.
17 Accepted a $2,400, 30-day, 7% note dated this day in granting Ava Privet a time extension on her past-due account receivable.
Apr. 16 Private dishonored her note when presented for payment.
June 2 Midnight Co. refuses to pay the note that was due to Ohlmeyer Co. on May 31.
prepare the journal entry to change the dishonored note plus accrued interest on Midnight Co.’s accounts receivable.
July 17 Received payment from Midnight Co. for the maturity value of its dishonored note plus interest for 46 days beyond maturity at 8%.
Aug. 7 Accepted a $5,450, 90-day, 10% note dated this day in granting a time extension on the past-due account receivable of Mulan Co.
Sept. 3 Accepted a $2,120, 60-day, 10% note dated this day in granting Noah Carson a time extension on his past-due account receivable.
Nov. 2 Received payment of principal plus interest from Carson for the September 3 note.
Nov. 5 Received payment of principal plus interest from Mulan for the August 7 note.
Dec. 1 Wrote off the Ava Privet account against Allowance for Doubtful Accounts.
1. Required: Prepare journal entries to record these transactions and events. (Round to the nearest dollar.)
2. Analysis Component: What reporting is necessary when a business pledges receivables as a security for a loan and the loan is still
outstanding at the end of the period? Explain the reason for this and the accounting principal being satisfied.