Prepare journal entries to record the following transactions entered into by Fli
ID: 2503265 • Letter: P
Question
Prepare journal entries to record the following transactions entered into by Flip Company:
2012
June 1 Accepted a $10,000, 12%, 1-year note from Flop as full payment on her account.
Nov. 1 Sold merchandise on account to Flap, Inc. for $12,000, terms 2/10, n/30.
Nov. 5 Flap, Inc. returned merchandise worth $500.
Nov. 9 Received payment in full from Flap, Inc.
Dec. 31 Accrued interest on Flop's note.
2013
June 1 Flop honored her promissory note by sending the face amount plus interest. No interest has been accrued in 2013
PLEASE WRITE ALL ACCOUTNS OUT.
Explanation / Answer
Hi,
Please find the answer as follows:
2012:
June 1:
Notes Receivable Dr. 10000
Accounts Receivable - Flop Cr. 10000
(Being Payment Received from Flop)
November 1:
Accounts Receivable - Flap Dr. 12000
Sales Cr. 12000
(Being Credit Sales made to Flap)
November 5:
Sales Returns and Allowance Dr. 500
Accounts Receivable - Flap Cr. 500
(Being Goods worth $500 returned by Flap)
November 9:
Cash (11500 - 230) Dr. 11270
Sales Discounts (11500*2%) Dr. 230
Accounts Receivable - Flap (12000 - 500) Cr.11500
(Being Payment made in Full within the Discount Period)
December 31:
Interest Receivable (10000*7/12*12/100) Dr. 700
Interest Revenue Cr. 700
(Being Interest Accrued on Flop's Note for the period June to December)
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2013
June 1
Cash Dr. 11200
Notes Receivable Cr. 10000
Interest Receivable Cr. 700
Interest Revenue (10000*12%*5/12) Cr. 500
(Being the Promissory Note honored by Flop)
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Notes:
1) Since payment is made by flap within the discount period (10 days of purchase), he will be entitled to the discount of 2% on the value of goods purchased by him with adjustment for goods returned by him. Therefore, he will get discount on 11500 only.
2) Interest will be accrued on Flop's Note for the Period - June 1 till December 31 (that is, 7 months)
3) Interest Revenue will be $ 500 for the Year 2013, since the promissory note has been honored by Flop on June 1 2013. Therefore, interest will be paid for 5 months from January 1 2013 till May 31 2013.
Thanks.