Entries: Loan Between Young Company & Dobson Industries
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Young Company lends Dobson Industries $30,000 on January 1, 2010, accepting a 9-month, 12% interest note. If Dobson dishonors the note and does not pay it in full at maturity but Young expects that it will eventually be able to collect the debt, which of the following entries should most likely be made by Young Company?
a.cash 30,000
notes receivable 30,000
b. note receivable 30,000
accounts receivable 30,000
c. note receivable 30,000
interest receivable 2,700
accounts receivable 32,700
d. note receivable 30,000
interest revenue 2,700
Nichols Company uses the percentage of receivables method for recording bad debts expense. The accounts receivable balance is $200,000 and credit sales are $1,000,000. Management estimates that 5% of accounts receivable will be uncollectible. What adjusting entry will Nichols Company make if the Allowance for Doubtful Accounts has a credit balance of $2,000 before adjustment?
A. Bad debts expense 10,000
Allowance for doubtful accounts 10,000
B. Bad debts expense 8,000
Allowance for doubtful accounts 8,000
C. Bad debt expense 8,000
accounts receivable 8,000
D. Bad debt expense 10,000
accounts receivable 10,000.
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Solution Summary
The solution discusses the loan between Young Company and Dobson Industries.
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Solution to Question No 1
Dishonored Note is one that is not paid in full at maturity. If Young Company expects eventual collection of Note Receivable, Amount due including interest is debited to Account Receivable. Note Receivable is credited with principal amount and interest revenue is credited with accrued interest to the date of maturity. Following journal entry is passed.
Accounts receivable $32,700
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