Problem 8-7A On January 1, 2017, Harter Company had Accounts Receivable $139,000

Question

Problem 8-7A On January 1, 2017, Harter Company had Accounts Receivable $139,000, Notes Receivable $25,000, and Allowance for Doubtful Accounts $13,200. The note receivable is from Willingham Company. It is a 4-month, 9% note dated December 31, 2016. Harter Company prepares financial statements annually at December 31. During the year, the following selected transactions occurred. Jan. 5 20 Feb. 18 Apr. 20 30 May 25 Aug. 18 25 Sept. 1 Sold $20,000 of merchandise to Sheldon Company, terms n/15. Accepted Sheldon Company's $20,000, 3-month, 8% note for balance due. Sold $8,000 of merchandise to Patwary Company and accepted Patwary's $8,000, 6-month, 9% note for the amount due. Collected Sheldon Company note in full. Received payment in full from Willingham Company on the amount due. Accepted Potter Inc.'s $6,000, 3-month, 7% note in settlement of a past-due balance on account. Received payment in full from Patwary Company on note due. The Potter Inc. note was dishonored. Potter Inc. is not bankrupt; future payment is anticipated. Sold $12,000 of merchandise to Stanbrough Company and accepted a $12,000, 6- month, 10% note for the amount due.

Explanation / Answer

Date

Accounts Title & Explanation

Debit

Credit

2017

Jan. 5

Accounts Receivable

$20000

     Sales

$20000

(For recording amount of credit sales)

Jan. 20

Note Receivable

$20000

     Accounts Receivable

$20000

(For recording note receivable received from Sheldon company)

Feb. 18

Note Receivable

$8000

     Sales

$8000

(For recording amount of sales and note receivable from Patwary Co.)

April 20

Cash

$20400

     Note Receivable

$20000

     Interest income ($20000 * 0.08) * 3 / 12

$400

(For recording amount received from Sheldon company)

April 30

Cash

$25750

     Note Receivable

$25000

     Interest income ($25000 * 0.09) * 4 / 12

$750

(For recording amount received from Willingham company)

May 25

Note Receivable

$6000

     Accounts Receivable

$6000

(For recording note receivable received from Potter Inc.)

Aug. 18

Cash

$8360

     Note Receivable

$8000

     Interest income ($8000 * 0.09) * 6 / 12

$360

(For recording amount received from Potter Inc.)

Aug. 25

Accounts Receivable

$6150

     Notes Receivable

$6000

     Interest income ($6000 * 0.07) * 3 / 12

$105

(For recording dishonoured of note receivable)

Sep. 1

Note Receivable

$12000

     Sales

$12000

(For recording amount of sales and note receivable from Stanbrought Co.)

Date

Accounts Title & Explanation

Debit

Credit

2017

Jan. 5

Accounts Receivable

$20000

     Sales

$20000

(For recording amount of credit sales)

Jan. 20

Note Receivable

$20000

     Accounts Receivable

$20000

(For recording note receivable received from Sheldon company)

Feb. 18

Note Receivable

$8000

     Sales

$8000

(For recording amount of sales and note receivable from Patwary Co.)

April 20

Cash

$20400

     Note Receivable

$20000

     Interest income ($20000 * 0.08) * 3 / 12

$400

(For recording amount received from Sheldon company)

April 30

Cash

$25750

     Note Receivable

$25000

     Interest income ($25000 * 0.09) * 4 / 12

$750

(For recording amount received from Willingham company)

May 25

Note Receivable

$6000

     Accounts Receivable

$6000

(For recording note receivable received from Potter Inc.)

Aug. 18

Cash

$8360

     Note Receivable

$8000

     Interest income ($8000 * 0.09) * 6 / 12

$360

(For recording amount received from Potter Inc.)

Aug. 25

Accounts Receivable

$6150

     Notes Receivable

$6000

     Interest income ($6000 * 0.07) * 3 / 12

$105

(For recording dishonoured of note receivable)

Sep. 1

Note Receivable

$12000

     Sales

$12000

(For recording amount of sales and note receivable from Stanbrought Co.)

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