Question

White Company allows customers to make purchases on credit. The terms of all credit sales are 2/10, n/30, and all sales are recorded at the gross price. Other customers can use a bank credit card where the bank deducts a 4% service charge for credit card sales and credits the bank account of White immediately when credit card receipts are deposited. White uses the perpetual inventory method.

Prepare journal entries to record the following selected transactions and events.

June 10	Accepted a $6,700, 45-day, 6% note dated this day in granting Cory Tam a time extension on his past-due account receivable.
June 20	Accepted a $6,240, 30-day, 10% note dates this day in granting F. Potter a time extension on his past-due account receivable.
July 20	F. Potter dishonored his note when presented for payment.
July 25	Received payment of principal plus interest from Cory Tam.

Please Explain

Answer 1

Journal entry

date	account and explanation	Debit	Credit
June 10	Notes receivable-Cory Tam	6700
	Account receivable-Cory Tam		6700
June 20	Notes receivable-F.Potter	6240
	Account receivable-F.Potter		6240
July 20	Account receivable-F.Potter	6292
	Notes receivable-F.Potter		6240
	Interest revenue (6240*10%*30/360)		52
	(To record bill dishonor)
July 25	Cash	6750.25
	Notes receivable-Cory tam		6700
	Interest revenue (6700*6%*45/360)		50.25
	(To record collection)