Question

Problem 9-5A Analyzing and journalizing notes receivable transactions LO C2, C3, P4 The following selected transactions are from Ohlm Company. (Use 360 days a year.) 2016 Dec. 16 Accepted a $12,500, 60-day, 8% note dated this day in granting Danny Todd a time extension on his past-due account receivable. 31 Made an adjusting entry to record the accrued interest on the Todd note. 2017 Feb. 14 Received Todd's payment of principal and interest on the note dated December 16. Mar. 2 Accepted a(n) $7,000, 8%, 90-day note dated this day in granting a time extension on the past-due account receivable from Midnight Co. 17 Accepted a(n) $3,000, 30-day, 7% note dated this day in granting Ava Privet a time extension on her past-due account receivable. Apr. 16 Privet dishonored her note when presented for payment. May 31 Midnight Co. refused to pay the note that was due to Ohlm Co. on May 31. Prepare the journal entry to charge the dishonored note plus accrued interest to Midnight Co.'s accounts receivable. July 16 Received payment from Midnight Co. for the maturity value of its dishonored note plus interest for 46 days beyond maturity at 8%. Aug. 7 Accepted a(n) $7,350, 90-day, 11% note dated this day in granting a time extension on the past-due account receivable of Mulan Co. Sep. 3 Accepted a(n) $2,090, 60-day, 11% note dated this day in granting Noah Carson a time extension on his past-due account receivable. Nov. 2 Received payment of principal plus interest from Carson for the September 3 note. Nov. 5 Received payment of principal plus interest from Mulan for the August 7 note. Dec. 1 Wrote off the Privet account against the Allowance for Doubtful Accounts. Required: 1-a. First, complete the table below to calculate the interest amount at December 31, 2016. 1-b. Use the calculated value to prepare your journal entries for 2016 transactions. 1-c. First, complete the table below to calculate the interest amounts. 1-d. Use those calculated values to prepare your journal entries for 2017 transactions.

Answer 1

Ohlm Company Journal Enteries Date Particulars 16.12.2017 Notes receivable-D. Todd a/c Dr. To Accounts receivable-D. Todd Debit in $ Credit in $ 12500 12500 31.12.2017 Dr. Interest receivable a/c To Interest revenue 42 14.2.2018 12667 125 Cash a/c Dr. To Interest revenue To Interest receivable To Notes receivable-D. Todd 42 12500 2.3.2018 7000 Notes receivable-Midnight Co a/c Dr. To Accounts receivable-Midnight Co 7000 17.3.2018 3000 Notes receivable-A. Privet a/c Dr. To Accounts receivable-A. Privet 3000 16.4.2018 Dr. 3018 Accounts receivable-A. Privet a/c To Interest revenue To Notes receivable-A. Privet 18 3000 31.5.2018 7140 Accounts receivable-Midnight Co a/c Dr. To Interest revenue To Notes receivable-Midnight Co 140 7000 16.7.2018 7213 Cash a/c Dr. To Interest revenue To Accounts receivable–Midnight Co 73 7140 7.8.2018 7350 Notes receivable-Mulan a/c Dr. To Accounts receivable-Mulan 7350 3.9.2018 2090 Notes receivable-N. Carson a/c Dr. To Accounts receivable-N. Carson 2090 2.11.2018 2128 Cash a/c Dr. To Interest revenue To Notes receivable-N. Carson 38 2090 5.11.2018 7552 Cash a/c Dr. To Interest revenue To Notes receivable-Mulan 202 7350 1.12.2018 3018 Allowance for doubtful accounts a/c Dr. To Accounts receivable-A. Privet 3018

First, complete the table below to calculate the interest amounts. Principal Rate(%) Time Total interest Midnight Co. Note - 2.3.2018 7000 8% 90/360 140 Privet Note 17.3.2018 3000 7% 30/360 18 Mulan Note Midnight Note N.Carson Note 7.8.2018 16.7.2018 3.9.2018 7350 7140 2090 11% 8% 11% 90/360 46/360 60/360 202 38 73 Principal Rate(%) Time Total interest Total through maturity 12500 8% 60/360 167 Interest recognized Dec-31 12500 8% 15/360 42