Saint John Industries uses the percentage of credit sales method to estimate Bad Debt Expense. The...

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Saint John Industries uses the percentage of credit sales method to estimate Bad Debt Expense. The company reported net credi

On July 1, 2018, Empire Inc. lends $8,400 to a customer and receives a 10% note due in two years. Interest is due in full on

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Ans:

$13000

	Calculation of Bad Debts Expense at the end of year:-
a	Net Credit Sales	=	$650,000
b.	% of Net Credit Sales estimated to be uncollectible	=	2.00%
c.	*Bad debts Expense for the year (ab)**	=	$13,000

Ans:	$420

Explanation:	Determination of Interest for 6 months upto Dec 31, 2018:-
	Amount lent on July 1, 2018	=	$8,400
	Life of Note	=	2	years
	Interest rate	=	10%	per year
	Interest for 6 months upto Dec 31, 2018	=	$8,400	×	10%	×	6
							12
	Interest for 6 months upto Dec 31, 2018	=	$420
	Journal entry
	Date	Particulars		Debit	Credit
	Dec 31, 2018	Interest receivable		$420
		Interest revenue			$420
		(To record accrued interest on note receivable)

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