Question

The following transactions are from Ohlm Company. (Use 360 days a year.) Year 1 Dec. 16 Accepted a $12,000, 60-day, 18% note 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. Year 2 Feb. 14 Received Todd's payment of principal and interest on the note dated December 16. Mar. 2 Accepted a(n) 56,909, 10%, 90-day note in granting a time extension on the past-due account receivable from Midnight Co. 17 Accepted a(n) $2,600, 30-day, 7% note in granting Ava Privet a time extension on her past due account receivable. Apr. 16 Privet dishonored her note. May 31 Midnight Co. dishonored its note. Aug. 7 Accepted a(n) $8,100, 90-day, 11% note in granting a time extension on the past due account receivable of Mulan Co. Sep. 3 Accepted a(n) $2,170, 60-day, 10% note 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, Year 1. 1-b. Use the calculated value to prepare your journal entries for Year 1 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 Year 2 transactions 2. If Ohlm pledged its receivables as security for a loan from the bank, where on the financial statements does it disclose this pledge of receivables? Complete this question by entering your answers in the tabs below. Required 1A Required 1B Required 10 Required 1D Required 2 First, complete the table below to calculate the interest amount at December 31, Year 1. Total Through Maturity Interest Recognized n.

Answer 1

1a.

Calculate the interest as follows:

	Total through maturity	Interest recognized December 31
Principal	$12,000	$12,000
rate	10%	10%
Time	60/360	15/360
Total Interest (Principal * rate * Time)	200	50

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1b.

Journal Entries for 2016 as follows:

Date	Account Titles and Explanations	Debit ($)	Credit ($)
Dec-16	Notes receivable D. Todd	12000
	Account receivable D. Todd		12000
Dec-31	Interest receivable	50
	Interest revenue		50

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1c.

Calculate the interest amount as given below:

	Midnight Co. Note- March 2, year 2	A. Privet Note - March 17, Year 2	Mulan note - August 7, year 2	Midnight Co. Note - May 31, year 2	N. Carson note - September 3, 2017
Principal	$6,900	$2,600	$8,100	$7038 (6900+138)	$2,170
Rate	8%	7%	10%	8%	10%
Time	90/360	30/360	90/360	46/360	60/360
Total Interest (Principal * rate * Time)	138	15	202.5	72	36

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1d.

Journal entries for 2017 as follows:

Feb-14	Cash	12200
	Interest revenue		150
	Interest receivable		50
	Notes receivable - D. Todd		12000
Mar-02	Notes receivable- Midnight Co	6900
	Accounts receivable- Midnight Co		6900
Mar-17	Notes receivable - A. Privet	2600
	Accounts receivable A. Privet		2600
Apr-16	Accounts receivable A. Privet	2615
	Notes receivable- A. Privet		2600
	Interest revenue		15
Jun-02	Accounts receivable Midnight Co	7038
	Notes receivable Midnight Co		6900
	Interest revenue		138
July-17	Cash	7110
	Interest revenue		72
	Accounts receivable Midnight Co		7038
Aug-07	Notes receivable- Mulan	8100
	Accounts receivable- Mulan		8100
Sep-03	Notes receivable- N. Garson	2170
	Accounts receivable- N. Garson		2170
Nov-02	Cash	2206
	Interest revenue		36
	Notes receivable- N. Garson		2170
Nov-05	Cash	8302.5
	Interest revenue		202.5
	Notes receivable- Multan		8100
Dec-01	Allowance for doubtful accounts	2615
	Accounts receivable - A. Privet		2615