Part (b) Problem 8-8A (Part Level Submission) Tardif Corporation adjusts its boo
ID: 2550764 • Letter: P
Question
Part (b)
Problem 8-8A (Part Level Submission) Tardif Corporation adjusts its books monthly. On September 30, 2015, notes receivable include the following: Issue Date Mar. 31, 2015 May 31, 2015 Aug. 31, 2015 Sept. 30, 2015 Maker RES Inc. Ihara Ltd. Dragon Limited MGH Corp. Principal Interest $18,200 5% 17,400 6% 4,600 9% 4% Term 7 months 18 months 2 months 16 months Interest is due at maturity for the RES and Dragon notes. Interest is due on the first day of the month for the Ihara and MGH notes. At September 30, the balance in the Allowance for Doubtful Notes account is nil. In October, the following selected transactions were completed. Oct. 1 31 31 31 31 Received the interest due from Ihara and MGH. Received notice that Dragon was unable to pay its note as scheduled. It expects to be able to pay in the future. The RES note matured and was received in full. Accrued interest on the Ihara and MGH notes. Analyzed the remaining notes for collectibility. Estimated that $17,400 of notes may not be collectible in the future because of significant labour issues currently being experienced by Ihara.Explanation / Answer
(a) Int due will on loans from RES and Dragon.
Int due for RES = 18200 x 5% x 6/12 = 455 and Int due for Dragon = 4600 x 9% x 1/12 = 35
Total Int due = 455+35 = $490
(b) Oct 1:
Debit: Cash / Bank 153
Credit: Interest income 153
Int due on Ihara = 17400 x 6% x 1/12 = 87 and Int due on MGH = 19800 x 4% x 1/12 = 66 Total amount = 153.
Oct 31: Dragon dishonored note entry:
Debit: Accounts receivable 4600
Credit: Notes receivable 4600
Debit: Notes receivable 4600
Credit: Notes receivable 4600
Oct 31: To record collection of note and interest of RES
Debit: Cash 18731
Credit: Notes Receivable 18200
Credit: Int due 455 (18200 x 5% x 6/12)
Credit : Int income 76 (Int income for Oct = 18200 x 5% x 1/12)
Oct 31: Accrued interest on the Ihara and MGH notes:
Debit: Int due 153 (Ihara = 17400 x 6% x 1/12) + (MGH = 19800 x 4% x 1/12)
Credit: Int receivable on notes 153
Oct 31: To record estimate of uncollectible notes
Debit: Allowance for doubtful debts 17400
Credit: Notes receivable 17400