Problem 8-8A (Part Level Submission) Tardif Corporation adjusts its books monthl
ID: 2551214 • Letter: P
Question
Problem 8-8A (Part Level Submission) Tardif Corporation adjusts its books monthly. On September 30, 2015, notes receivable include the following: Maker Principal Interest Term Issue Date Mar. 31, 2015 May 31, 2015 RES Inc. Ihara Ltd. $18,200 5%7 months 17,400 6% 18months Aug. 31, 2015 Dragon Limited 4,600 9% 2months 19,800 4% 16 months Sept. 30, 2015 MGH Corp. 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) Balance in the Interest Receivable: 837.50 or 838 Balance in the Notes Receivable: $60000 Issue Date Maker Principal Interest Term Interest Receivable on Sept. 30, 2015 Mar. 31, 2015 RES Inc. 18200 5% 7 months 455 ($18200x 5% x 6/12) May. 31, 2015 Ihara Ltd. 17400 6% 18 months 348 ($17400 *6%*4 /12) Aug. 31, 2015 Dragon Limited 4600 9% 2 months 34.5 ($4600 x 9% x 1/12) Sept. 30, 2015 MGH Corp. 19800 4% 16 months 0 60000 837.5 (b) Date Account Titles and Explanation Debit Credit Oct. 1 Cash 348 Interest receivable ($17400*6%*4/12) 348 (To record collection of interest on notes) Oct. 31 Accounts receivable 4669 Notes receivable 4600 Interest receivable ($4600 x 9% x 1/12) 34.5 Interest revenue ($4600 x 9% x 1/12) 34.5 (To record dishonoured note; eventual collection) Oct. 31 Cash 18731 Notes receivable 18200 Interest receivable ($18200 x 5% x 6/12) 455 Interest revenue ($18200 x 5% x 1/12) 76 (To record collection of note and interest) Oct. 31 Interest receivable (17400*6%*1/12)+(19800*4%*1/12) 153 Interest revenue 153 (To record accrual of interest) Oct. 31 Bad debts expense 17400 Allowance for doubtful notes 17400 (To record estimate of uncollectibel notes)