Question

Problem# 5 (20 points) The following series of transactions occurred during Year 1 and Year 2, when Li nwood Co. sold merchandise to John Moore. Linwood's annual accounting period ends on December 3 10/01/Yr 1 Sold $12,000 of merchandise to John Moore, terms 2/10, n/30. 11/15/Yr 1 Moore reports that he cannot pay the account until early next year. He agrees to exchange the account for a 120-day, 12% note receivable. 12/31/Y 03/15/Yr 2 Linwood rec 03/22/Yr 2 Linwo (NSF). r 1 Prepared the adjusting journal entry to record accrued interest on the note. eives a check from Moore for the maturity value (with interest) of the note od receives notification that Moore's check is being returned for nonsufficient funds 12/31/Yr 2 Linwood writes off Moore's account as uncollectible. Prepare Linwood Co.'s journal entries to record the above transactions. The company uses the allowance method to account for its bad debt expense.

Answer 1

Date Particulars YEAR! 1/M/fr1 Accounts Receivablk A/c Oohn Moore).Dr Debit Credit 12,000 12,040 (Being goodk sold on crect to John Moore net terms 2/10 Ne3a) 1 1/15/Yr l 12% Note Receivable A/c ...-Dr 12,000 To Accgunts Rceivt 12,000 (Being AR converted to nota receivable) 12B1/Yr1 InterRecivabe Afc ..Dr 181 To Inter Revenur (Beinginteret on notes recognised from 11/15 to 12/31ie46dys)- 12000463651296 181

YEAR П 03y15fYr2 CahAfc ...Dr 12,181 To 12% Notes Receivable 12,0ti To Intet Recevabl 181 (Being check received from John Moore) 03y15fYr2 BankA/fc....Dr 12,181 12,181 (Being check d-postedin fhe bank) 03/22/Yr2 12% Notes Receivable A/c Dr 12,0ti Interet Receivabe Afc...Dr 181 To KankAfc (Being check received dkhonouredl 12,181 1231/Yr2 Inteet Receivable Afc ....Dr 1,410 To Intet Reve 1,410 (Bein^interestccrued on NoteReceivable - 12tiix012) 13,621 To 12% Notes Receivable 12,0ti To Intet Recevabl 1,621 (Being Nols rec. andinlertaccrued thereon converted to AR) 12f31/Yr2 Urcolecibe accounti eipense Afc ....Dr 13,621 ToA wance for DoubtfulDcbtr 13,621 Being entry pased for uncolkci receiab-) 1231/Y2 Aowance for Doubtful Debts Afc....Dr To Accgunts Rceivt (Being bad d-bt writmen ofi) 13,621 13,621 231/Yr2 Se ing Generrl andAdniinepense Afc (Income Statemen*)....Dr 13,621 To Urcokcibe accounti erpense (Being baddkbterpense chared to P/LA/c) 13,621