The following selected transactions are from Seeker Company.
Nov. 1 | Accepted a $4,800, 90-day, 8% note dated this day in granting Julie Stephens a time extension on her past-due account receivable. |
Dec. 31 | Made an adjusting entry to record the accrued interest on the Stephens note. |
Jan. | 30 | Received Stephens’s payment for principal and interest on the note dated November 1. |
Feb. | 28 | Accepted a $12,600, 6%, 30-day note dated this day in granting a time extension on the past-due account receivable from Kramer Co. |
Mar. | 1 | Accepted a $6,200, 60-day, 8% note dated this day in granting Shelly Myers a time extension on her past-due account receivable. |
| 30 | The Kramer Co. dishonored its note when presented for payment. |
April | 30 | Received payment of principal plus interest from Myers for the March 1 note. |
June | 15 | Accepted a $2,000, 60-day, 10% note dated this day in granting a time extension on the past-due account receivable of Rhonda Rye. |
| 21 | Accepted a $9,500, 90-day, 12% note dated this day in granting J. Striker a time extension on his past-due account receivable. |
Aug. | 14 | Received payment of principal plus interest from R. Rye for the note of June 15. |
Sep. | 19 | Received payment of principal plus interest from J. Striker for the June 21 note. |
Nov. | 30 | Wrote off Kramer’s account against Allowance for Doubtful Accounts. |
Required
1. Prepare journal entries to record these transactions and events. (Round amounts to the nearest dollar.)
2. What reporting is necessary when a business pledges receivables as security for a loan and the loan is still outstanding at the end of the period? Explain the reason for this requirement and the accounting principle being satisfied.
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