Ditzler Company, a construction supply company, uses the allowance method of acc
ID: 2523838 • Letter: D
Question
Ditzler Company, a construction supply company, uses the allowance method of accounting for uncollectible accounts receivable. Selected transactions completed by Ditzler company are as follows:
Feb 1 Sold merchandise on account to Ames Co., $8000. The cost of the
merchandise sold was $4500
Mar. 15 Accepted a 60-day, 12% note for $8000 from Ames Co. on account
Apr. 9 Wrote off a $2500 account from Dorset Co. as uncollectible
Apr. 21 Loaned $7500 cash to Jill Klein, receiving a 90-day, 14% note
May 14 Received the interest due from Ames Co. and a new 90-day, 14% note
as a renewal of the loan. (Record both the debit and the credit to the
notes receivable account).
June 13 Reinstated the account of Dorset Co., written off on April 9, and
received $2500 in full Payment
July 20 Jill Klein dishonored her note
Aug. 12 Received from Ames Co. the amount due on its note of May 14
Aug 19 Received from Jill Klein the amount owed on the dishonored note,
plus interest for 30 day at 15% computed on the maturity value of the
note
Dec 16 Accepted a 60-day, 12% note for $12000 from Global company on
Account
Dec 31 It is estimated that 3% of the credit sales of $1,375,000 for the year
ended December 31 will be uncollectible
Instructions:
1. Journalize the transactions
2. Journalize the adjusting entry to record the accrued interest on December 31 on the Global Company note.
Explanation / Answer
Date Account title and explanation Debit Credit 1. Journal entry Feb-01 Accounts receivable-Ames Co. $ 8,000 Sales revenue $ 8,000 Cost of goods sold $ 4,500 Merchandise inventory $ 4,500 Mar-15 Notes receivable-Ames Co. $ 8,000 Accounts receivable-Ames Co. $ 8,000 Apr-09 Allowance for doubtful accounts $ 2,500 Accounts receivable-Dorset Co. $ 2,500 Apr-21 Notes receivable-Jill Klein $ 7,500 Cash $ 7,500 May-14 Cash (8,000*12%*60/360) $ 160 Notes receivable-Ames Co. $ 8,000 Interest revenue $ 160 Notes receivable-Ames Co. $ 8,000 Jun-13 Accounts receivable-Dorset Co. $ 2,500 Allowance for doubtful accounts $ 2,500 Cash $ 2,500 Accounts receivable-Dorset Co. $ 2,500 Jun-20 Accounts receivable-Jill Klein $ 7,763 Notes receivable-Jill Klein $ 7,500 Interest revenue ($7,500*14%*90/360) $ 263 Aug-12 Cash $ 8,280 Notes receivable-Ames Co. $ 8,000 Interest revenue ($8,000*14%*90/360) $ 280 Aug-19 Cash $ 7,860 Accounts receivable-Jill klein $ 7,763 Interest revenue ($7,763*15%*30/360) $ 97 Dec-16 Notes receivable-Global company $ 12,000 Accounts receivable-Global company $ 12,000 Dec-31 Bad debt expense ($1,375,000*3%) $ 41,250 Allowance for doubtful accounts $ 41,250 2. Adjusting entry Dec-31 Interest receivable-Global Co.($12,000*12%*15/360) $ 60 Interest revenue $ 60