Question

The following transactions are from Ohlm Company. (Use 360 days a year.)

Year 1

Dec.		16		Accepted a $11,900, 60-day, 8% 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) $7,100, 8%, 90-day note in granting a time extension on the past-due account receivable from Midnight Co.
		17		Accepted a(n) $3,500, 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) $7,100, 90-day, 12% note in granting a time extension on the past-due account receivable of Mulan Co.
Sep.		3		Accepted a(n) $3,380, 60-day, 8% 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?

Answer 1

D.Todd note-December 16,2016
		total	interest
		through	recognized
		maturity	31-Dec
Principal		11,900	11,900
Rate(%)		8%	8%
time		60/360	15/360
total interest		159	40
Date	General journal				Debit	credit
2016
16-Dec	Note receivable				11,900
	Account receivable					11,900
31-Dec	interest receivable				40
	interest revenue					40
		Midnight	privet	Mulan		carson
		2-Mar	17-Mar	7-Aug		3-Sep
		2017	2017	2017		2017
Principal		7,100	3,500	7,100		3,380
Rate(%)		8%	7%	12%		8%
time		90/360	30/360	90/360		60/360
total interest		142	20	213		45

Date	General journal				Debit	credit
2017
14-Feb	Cash				12059
	interest revenue					119
	Note receivable-T Todd					11,900
	interest receivable					40
2-Mar	Note receivable				7,100
	Account receivable-Midnight co					7,100
17-Mar	Note receivable				3,500
	Account receivable-Privet					3,500
16-Apr	Account receivable-privet				3,520
	note receivable					3,500
	interest revenue					20
31-May	Account receivable-Midnight				7,242
	note receivable					7,100
	interest revenue					142
7-Aug	Note receivable				7,100
	account receivable-Mulan Co					7,100
3-Sep	Note receivable				3,380
	account receivable-Carson					3,380
2-Nov	cash				3,425
	note receivable					3,380
	interest revenue					45
5-Nov	cash				7,313
	note receivable					7,100
	interest revenue					213
1-Dec	Allowance for Doubtful accounts				3,520
	Account receivable-privet					3,520
	pledge-	Disclosure of the arrangement in notes to the financial statement