Question

The following transactions are from Ohlm Company. Problem 9-5A Analyzing and journalizing notes receivable transactions C2 C3 P4 T Year 1 Dec. 16 Accepted a $10,800, 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. Check Feb 14, C interest Revenue, $108 May 31. C Interest Revenue, $122 Year 2 Feb. 14 Received Todd's payment of principal and interest on the note dated December 16. Mar. 2 Accepted a 56,100,8%, 90-day note in granting a time extension on the past-due account re- ceivable from Midnight Co. 17 Accepted a $2,400, 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 $7.440, 90-day, 10% note in granting a time extension on the past-due account re- ceivable of Mulan Co. Sep. 3 Accepted a $2,100, 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. Nov 2. Ct Interest Revenue, $35 Required 1. Prepare journal entries to record these transactions and events. Analysis Component 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

Answer -

Date	Particulars	Debit	Credit
Dec-16	Notes Receivable	$10,800
	Accounts Receivable		$10,800
Dec-31	Interest Receivable	$36
	Interest Revenue		$36
	(10,800 * 8% * 15/360)
Year - 2
Feb-14	Cash	$10,944
	Interest Receivable		$36
	Interest Revenue		$108
	Notes Receivable		$10,800
Mar-02	Notes Receivable--Midnight Co	$6,100
	Accounts Receivable--Midnight Co		$6,100
Mar-17	Notes Receivable	$2,400
	Accounts Receivable		$2,400
Apr-16	Accounts Receivable	$2,414
	Interest Revenue (2,400 * 7% * 30/360)		$14
	Notes Receivable		$2,400
May-31	Accounts Receivable--Midnight Co	$6,222
	Interest Revenue (6,100 x 8% x 90/360)		$122
	Notes Receivable--Midnight Co		$6,100
Aug-07	Notes Receivable--Mulan Co	$7,440
	Accounts Receivable--Mulan Co		$7,440
Sep-03	Notes Receivable--Noah Carson	$2,100
	Accounts Receivable--Noah Carson		$2,100
Nov-02	Cash	$2,135
	Interest Revenue (2,100 * 10% * 60/360)		$35
	Notes Receivable		$2,100
Nov-05	Cash	$7,626
	Interest Revenue (7,440 * 10% * 90/360)		$186
	Notes Receivable		$7,440
Dec-01	Allowance for Doubtful Accounts	$2,414
	Accounts Receivable		$2,414

2) Foot note of financial statements

If a business decides to pledge its receivables as collateral for a loan and the loan remains outstanding at the end of the accounting period, the company is required to disclose this information in the notes accompanying its current financial statements

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