Analyzing and journalizing notes receivable transactions
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Fundamental Accounting Principals, 18th Edition
Wild, Larson, Chiappetta, McGraw-Hill Irwin
Problem 9-5A: Analyzing and journalizing notes receivable transactions.
The following transactions are from 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.
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Fundamental Accounting Principals, 18th Edition
Wild, Larson, Chiappetta, McGraw-Hill Irwin
Problem 9-5A: Analyzing and journalizing notes receivable transactions.
The following transactions are from 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.
The accounts receivable is converted to a notes receivable. The journal entry is
Dec. 16 Notes Receivable-D. Todd 10,800
Accounts Receivable-D. Todd 10,800
31 Made an adjusting entry to record the accrued interest on the Todd note.
The interest has accrued for 15 days. The interest amount is 10,800X8%X15/360 = $36. The entry is
Dec. 31 Interest Receivable 36
Interest Revenue 36
2008
Feb. 14 Received Todd's payment of principal and interest on the note dated December
16.
The balance days are 60-15=45. The interest revenue for 45 days is 10,800X8%X45/360 = $108. The journal entry is
Feb. 14 Cash 10,944
Interest Revenue 108
Interest Receivable 36
Notes Receivable-D. Todd 10,800
Mar. 2 Accepted a $6,120, 8%, 90-day note dated this day in granting a time extension
...
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