Ditzler Company, a construction supply company, uses the allowance method of acc
ID: 2525316 • 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
Part 1)
The journal entries are prepared as below:
_____
Part 2)
The adjusting entry is given as follows:
Date Account Titles Debit Credit Feb-01 Accounts Receivable - Ames Co. $8,000.00 Sales $8,000.00 Feb-01 Cost of Merchandise Sold $4,500.00 Merchandise Inventory $4,500.00 Mar-15 Notes Receivable - Ames Co. $8,000.00 Accounts Receivable - Ames Co. $8,000.00 Apr-09 Allowance for Doubtful Accounts $2,500.00 Accounts Receivable - Dorset Co. $2,500.00 Apr-21 Notes Receivable - Jill Klein $7,500.00 Cash $7,500.00 May-14 Notes Receivable - Ames Co. $8,000.00 Cash $160.00 Notes Receivable - Ames Co. $8,000.00 Interest Revenue (8,000*12%*60/360) $160.00 Jun-13 Accounts Receivable - Dorset Co. $2,500.00 Allowance for Doubtful Accounts $2,500.00 Jun-13 Cash $2,500.00 Accounts Receivable - Dorset Co. $2,500.00 Jul-20 Accounts Receivable - Jill Klein $7,762.50 Notes Receivable - Jill Klein $7,500.00 Interest Revenue (7,500*14%*90/360) $262.50 Aug-12 Cash $8,280.00 Notes Receivable - Ames Co. $8,000.00 Interest Revenue (8,000*14%*90/360) $280.00 Aug-19 Cash $7,859.53 Accounts Receivable - Jill Klein $7,762.50 Interest Revenue (7,762*15%*30/360) $97.03 Dec-16 Notes Receivable - Global Company $12,000.00 Accounts Receivable - Global Company $12,000.00 Dec-31 Bad Debt Expense $41,250.00 Allowance for Doubtful Accounts (1,375,000*3%) $41,250.00