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Journal Entries: Donovans, Rowenda Hotels, Wilson Company

A) A summary of Donovan's December 31, 2009, accounts receivable aging schedule is presented below along with the estimated percent uncollectible for each age group:

Age Group Amount %
0-60 Days $50,000 .5
61-90 Days 12,000 1.0
91-120 Days 3,000 10.0
Over 120 days 1,000 50.00

The allowance for uncollectible accounts had a balance of $1,400 on January 1, 2009. During the year, bad debts of $750 were written off.

Prepare all journal entries for 2009 with respect to bad debts and the allowance for uncollectible accounts.

B) On December 1, 2009, Rowenda Hotels borrowed $500,000 at 12% interest and pledged $600,000 in accounts receivables as collateral. Additionally, Rowenda was charged a finance fee equal to 1% of the accounts receivable assigned. At the end of December, $300,000 of the assigned receivables were collected and remitted to the lender along with accrued interest.

Prepare journal entries to record the borrowing, the assignment of receivables, the collection on the receivables, and the recognition of interest expense.

C) The Wilson Company maintains a checking account at the Bank of the North. The bank provides a bank statement along with canceled checks on the last day of each month. The October 31, 2007 bank statement included the following information:

Balance Oct. 1, 2007 $31,590

Deposits 75,000
Checks processed (62,500)
Services Charges (325)
NSF checks (1,200)
Monthly loan payment deducted
directly by bank from account
(includes $200 in interest) (3,400)

Balance Oct. 31, 2007 $38,140

The company's general ledger cash (checking) account had a balance of $42,544 at the end of October. Deposits outstanding totaled $4,224 and all checks written by the company were processed by the bank except for those totaling $5,620. In addition, a check for $500 for the purchase of office furniture was incorrectly recorded by the company as a $50 disbursement. The bank correctly processed the check during October.

1. Prepare a bank reconciliation for the month of October.
2. Prepare the necessary journal entries at the end of October to adjust the general ledger cash account.

D) The petty cash fund of Diamond Electra Company contained the following items on September 30, 2009:

Currency and coins $21.00
Receipts for the following expenditures:
Delivery charges $39.00
Office Supplies $ 30.00
Restaurant receipt for entertaining a customer $90.00
An IOU from an employee $15.00

Total $195.00

The petty cash fund was established on September 1, 2008, with a transfer of $250 from cash to the petty cash account.

Prepare the journal entries to establish the petty cash account and to replenish the fund at the end of November.

Solution Summary

The expert provides journal entries for Donovans, Rowenda Hotel and Wilson Company.