Accounting Problems & Journalising: Solution Set

1. An article recently appeared in the Wall Street Journal indicating that companies are selling their receivables at
a record rate. Why are companies selling their receivables?

2. How is a gain or loss on the sale of a plant asset computed?

3. What are natural resources, and what is their distinguishing
characteristics?

4. Explain what depletion is and how it is computed.

5. On January 1, 2002, Case Western Company had Accounts Receivable of $54,200 and
Allowance 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.

Journalize the transactions.