Problem 8-8A (Part Level Submission) Tardif Corporation adjusts its books monthl

Question

Problem 8-8A (Part Level Submission) Tardif Corporation adjusts its books monthly. On September 30, 2015, notes receivable include the following: Maker Principal Interest Term Issue Date Mar. 31, 2015 RES Inc May 31, 2015 Ihara Ltd Aug. 31, 2015 Dragon Limited Sept. 30, 2015 MGH Corp $15,000 6% 7% 7% 21,300 790 7 months 18 months 2 months 16 months 17,600 5,800 Interest is due at maturity for the RES and Dragon notes. Interest is due on the first day of the month for the Ihara and MGH notes. At September 30, the balance in the Allowance for Doubtful Notes account is nil. In October, the following selected transactions were completed Oct. 1 31 31 31 31 Received the interest due from Ihara and MGH Received notice that Dragon was unable to pay its note as scheduled. It expects to be able to pay in the future The RES note matured and was received in full Accrued interest on the Ihara and MGH notes Analyzed the remaining notes for collectibility. Estimated that $17,600 of notes may not be collectible in the future because of significant labour issues currently being experienced by Ihara

Explanation / Answer

Balance in notes receivable $59700.

Maker Principal Interest Term Interest Receivable on Sept. 30, 2015 Calculation of interest RES Inc. $ 15,000 6% 7 months $                    450 ($15000 x 5% x 6/12) Ihara Ltd. $ 17,600 7% 18 months $                    411 ($17600 x 3% x 4/12) Dragon Limited $    5,800 7% 2 months $                      34 ($5800 x 5% x 1/12) MGH Corp. $ 21,300 7% 16 months $                         - ($21300 x 5% x 0/12) $ 59,700 $                    895 Balance in interest receivable $895.

Balance in notes receivable $59700.

Date Account Titles and Explanation Debit Credit Oct. 1 Cash $     103 Interest receivable ($17600 x 7% x 1/12) $         103 (To record collection of interest on notes) Oct. 31 Accounts receivable $ 5,868 Notes receivable $      5,800 Interest receivable ($5800 x 7% x 1/12) $           34 Interest revenue ($5800 x 7% x 1/12) $           34 (To record dishonoured note; eventual collection) Oct. 31 Cash $15,525 Notes receivable $    15,000 Interest receivable ($15000 x 6% x 6/12) $         450 Interest revenue ($15000 x 6% x 1/12) $           75 (To record collection of note and interest) Oct. 31 Interest receivable [$103 + ($121300 x 7% x 1/12)] $     227 Interest revenue $         227 (To record accrual of interest) Oct. 31 Bad debts expense $17,600 Allowance for doubtful notes $    17,600 (To record estimate of uncollectibel notes)

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