Journalizing with discounts


Problem:

On January 1, 2002, Case Western Company had Accounts Receivable of $54,200 andAllowance for Doubtful Accounts of $4,700. Case Western Company prepares financial statements annually. During the year the following selected transactions occurred. Jan. 5 Sold $7,000 of merchandise to Garth Brooks Company, terms n/30.

Feb. 2 Accepted a $7,000, 4-month, 12% promissory note from Garth Brooks Company for balance due.

12 Sold $7,800 of merchandise to Gage Company and accepted Gage's $7,800, 2-month, 10% note for the balance due.

26 Sold $4,000 of merchandise to Mathias Co., terms n/10.

Apr. 5 Accepted a $4,000, 3-month, 8% note from Mathias Co. for balance due.

12 Collected Gage Company note in full.

June 2 Collected Garth Brooks Company note in full.

July 5 Mathias Co. dishonors its note of April 5. It is expected that Mathias will eventually pay the amount owed.

15 Sold $5,000 of merchandise to Tritt Co. and accepted Tritt's $5,000, 3- month, 12% note for the amount due.

Oct. 15 Tritt Co.'s note was dishonored. Tritt Co. is bankrupt, and there is no hope of future settlement.

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Accounting Basics: Journalizing with discounts
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