Relax Recliner Chairs completed the following selected transactions: 2018 Sold m

Question

Relax Recliner Chairs completed the following selected transactions: 2018 Sold merchandise inventory to Go-Mart, receiving a $43,000, nine-month, 16% note. Ignore Cost of Goods Sold. Jul. 1 Oct. 31 Dec. 31 31 Recorded cash sales for the period of $23,000. Ignore Cost of Goods Sold. Made an adjusting entry to accrue interest on the Go-Mart note. Made an adjusting entry to record bad debts expense based on an aging of accounts receivable. The aging schedule shows that $14,900 of accounts receivable will not be collected. Prior to this adjustment, the credit balance in Allowance for Bad Debts is $10,700. 2019 Apr. 1 Jun, 23 Collected the maturity value of the Go-Mart note. Sold merchandise inventory to Allure, Corp., receiving a 60-day, 6% note for $7,000. Ignore Cost of Goods Sold. Allure, Corp. dishonored its note at maturity; the business converted the Aug. 22 maturity value of the note to an account receivable. Nov. 16 Loaned $20,000 cash to Tench, Inc., receiving a 90-day, 8% note. Dec. 5 Collected in full on account from Allure, Corp. 31 Accrued the interest on the Tench, Inc. note Record the transactions in the journal of Relax Recliner Chairs. Explanations are not required. (Round to the nearest dollar.)

Explanation / Answer

16% Notes receivable a/c

To Sales a/c

$43,000

$43,000

Cash a/c

To Sales a/c

$23,000

$23,000

Accrued interest a.c

To Interest income a/c

[$43,000 x 16% x (6months/12)]

$3,440

Bad debt expense a/c

Allowance for Bad Debts a/c

To Accounts receivable a/c

$4,200

$10,700

$14,900

Cash a/c

To 16% Notes receivable a/c

To Accrued interest a/c

To Interest income a/c [$43,000 x 16% x (3months/12)]

$48,160

$43,000

$3,440

$1,720

6% Notes receivable a/c

To Sales a/c

$7,000

$7,000

Account receivable a/c

To 6% notes receivable a/c

$7,000 + [$7,000 x 6% x (60 days/365)]

$7,069

$7,069

8% notes receivable a/c

To cash a/c

$20,000

$20,000

Cash a/c

To Account receivable a/c

$7,069

$7,069

Accrued interest a/c

To Interest income a/c

[$20,000 x 8% x 46 days/365]

$202

Date Particulars Debit Credit July 1,2018

16% Notes receivable a/c

To Sales a/c

$43,000

$43,000

Oct 31, 2018

Cash a/c

To Sales a/c

$23,000

$23,000

Dec 31, 2018

Accrued interest a.c

To Interest income a/c

[$43,000 x 16% x (6months/12)]

$3,440

$3,440 Dec 31, 2018

Bad debt expense a/c

Allowance for Bad Debts a/c

To Accounts receivable a/c

$4,200

$10,700

$14,900

Apr 1, 2019

Cash a/c

To 16% Notes receivable a/c

To Accrued interest a/c

To Interest income a/c [$43,000 x 16% x (3months/12)]

$48,160

$43,000

$3,440

$1,720

June 23, 2019

6% Notes receivable a/c

To Sales a/c

$7,000

$7,000

Aug 22 , 2019

Account receivable a/c

To 6% notes receivable a/c

$7,000 + [$7,000 x 6% x (60 days/365)]

$7,069

$7,069

Nov 16, 2019

8% notes receivable a/c

To cash a/c

$20,000

$20,000

Dec 5, 2019

Cash a/c

To Account receivable a/c

$7,069

$7,069

Dec 31, 2019

Accrued interest a/c

To Interest income a/c

[$20,000 x 8% x 46 days/365]

$202

$202

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