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Recording and Reporting Transactions with Short-Term, Interest-Bearing Note Receivable On April 1, 2020, Welsch Company sold...

Recording and Reporting Transactions with Short-Term, Interest-Bearing Note Receivable

On April 1, 2020, Welsch Company sold merchandise to Customer Rodriguez for $28,800, terms 2/10, n/30. Because of nonpayment by Rodriguez, Welsch received a $28,800, 10%, 12-month note dated May 1, 2020. The stated rate and the market rate are equal. The company’s annual reporting period ends December 31. Customer Rodriguez paid the note in full, plus cash interest, on its maturity date.

Required

a. Prepare all entries for Welsch related to the above transactions, including any year-end adjustments. Welsh uses the gross method for cash discounts.

Date Account Name Dr. Cr.
April 1, 2020 AnswerCashAccounts ReceivableAllowance for Doubtful AccountsInterest ReceivableReceivable from FactorNote ReceivableDiscount on Note ReceivablePayable to Seller of ReceivablesRefund LiabilityRecourse LiabilityNote PayableSales RevenueSales ReturnsSales DiscountSales Discount ForfeitedFinancing RevenueInterest RevenueCost of Goods SoldBad Debt ExpenseFinance ExpenseInterest ExpenseLoss on Sale of NoteLoss on Sale of ReceivablesN/A Answer Answer
AnswerCashAccounts ReceivableAllowance for Doubtful AccountsInterest ReceivableReceivable from FactorNote ReceivableDiscount on Note ReceivablePayable to Seller of ReceivablesRefund LiabilityRecourse LiabilityNote PayableSales RevenueSales ReturnsSales DiscountSales Discount ForfeitedFinancing RevenueInterest RevenueCost of Goods SoldBad Debt ExpenseFinance ExpenseInterest ExpenseLoss on Sale of NoteLoss on Sale of ReceivablesN/A Answer Answer
May 1, 2020 AnswerCashAccounts ReceivableAllowance for Doubtful AccountsInterest ReceivableReceivable from FactorNote ReceivableDiscount on Note ReceivablePayable to Seller of ReceivablesRefund LiabilityRecourse LiabilityNote PayableSales RevenueSales ReturnsSales DiscountSales Discount ForfeitedFinancing RevenueInterest RevenueCost of Goods SoldBad Debt ExpenseFinance ExpenseInterest ExpenseLoss on Sale of NoteLoss on Sale of ReceivablesN/A Answer Answer
AnswerCashAccounts ReceivableAllowance for Doubtful AccountsInterest ReceivableReceivable from FactorNote ReceivableDiscount on Note ReceivablePayable to Seller of ReceivablesRefund LiabilityRecourse LiabilityNote PayableSales RevenueSales ReturnsSales DiscountSales Discount ForfeitedFinancing RevenueInterest RevenueCost of Goods SoldBad Debt ExpenseFinance ExpenseInterest ExpenseLoss on Sale of NoteLoss on Sale of ReceivablesN/A Answer Answer
Dec. 31, 2020 AnswerCashAccounts ReceivableAllowance for Doubtful AccountsInterest ReceivableReceivable from FactorNote ReceivableDiscount on Note ReceivablePayable to Seller of ReceivablesRefund LiabilityRecourse LiabilityNote PayableSales RevenueSales ReturnsSales DiscountSales Discount ForfeitedFinancing RevenueInterest RevenueCost of Goods SoldBad Debt ExpenseFinance ExpenseInterest ExpenseLoss on Sale of NoteLoss on Sale of ReceivablesN/A Answer

Mark 0.00 out of 1.00

Answer

AnswerCashAccounts ReceivableAllowance for Doubtful AccountsInterest ReceivableReceivable from FactorNote ReceivableDiscount on Note ReceivablePayable to Seller of ReceivablesRefund LiabilityRecourse LiabilityNote PayableSales RevenueSales ReturnsSales DiscountSales Discount ForfeitedFinancing RevenueInterest RevenueCost of Goods SoldBad Debt ExpenseFinance ExpenseInterest ExpenseLoss on Sale of NoteLoss on Sale of ReceivablesN/A

Answer Answer
April 30, 2021 AnswerCashAccounts ReceivableAllowance for Doubtful AccountsInterest ReceivableReceivable from FactorNote ReceivableDiscount on Note ReceivablePayable to Seller of ReceivablesRefund LiabilityRecourse LiabilityNote PayableSales RevenueSales ReturnsSales DiscountSales Discount ForfeitedFinancing RevenueInterest RevenueCost of Goods SoldBad Debt ExpenseFinance ExpenseInterest ExpenseLoss on Sale of NoteLoss on Sale of ReceivablesN/A Answer Answer
AnswerCashAccounts ReceivableAllowance for Doubtful AccountsInterest ReceivableReceivable from FactorNote ReceivableDiscount on Note ReceivablePayable to Seller of ReceivablesRefund LiabilityRecourse LiabilityNote PayableSales RevenueSales ReturnsSales DiscountSales Discount ForfeitedFinancing RevenueInterest RevenueCost of Goods SoldBad Debt ExpenseFinance ExpenseInterest ExpenseLoss on Sale of NoteLoss on Sale of ReceivablesN/A Answer 28,800
Interest Receivable Answer Answer
AnswerCashAccounts ReceivableAllowance for Doubtful AccountsInterest ReceivableReceivable from FactorNote ReceivableDiscount on Note ReceivablePayable to Seller of ReceivablesRefund LiabilityRecourse LiabilityNote PayableSales RevenueSales ReturnsSales DiscountSales Discount ForfeitedFinancing RevenueInterest RevenueCost of Goods SoldBad Debt ExpenseFinance ExpenseInterest ExpenseLoss on Sale of NoteLoss on Sale of ReceivablesN/A Answer Answer

b. Show what should be presented on the 2020 income statement and balance sheet.

Income Statement, 2020
Sales revenue Answer
Interest revenue Answer
Balance Sheet, December 31, 2020
Note receivable Answer
Interest receivable Answer
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Answer #1

a. Prepare all entries for Welsch related to the above transactions, including any year-end adjustments. Welsh uses the gross method for cash discounts.

Date Account Name Dr. Cr.
April 1, 2020 Account receivable 28800
Sales revenue 28800
May 1, 2020 Notes receivable 28800
Account receivable 28800
Dec. 31, 2020 Interest receivable (28800*10%*8/12) 2400
Interest revenue 2400
April 30, 2021 Cash 32400
Interest revenue 1200
Interest Receivable 2400
Notes receivable 28800

b. Show what should be presented on the 2020 income statement and balance sheet.

Income Statement, 2020
Sales revenue 28800
Interest revenue 2400
Balance Sheet, December 31, 2020
Note receivable 28800
Interest receivable 2400
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