Reference no: EM132800148
Question 1 - On December 31, 20X1, the company reported a debit balance of $200,000 in accounts receivable and a credit balance of $5,000 in the allowance for doubtful accounts. December 31 is the company's reporting date. During 20X2, the company had the following transactions:
a. The company made a credit sale of $300,000.
b. The company wrote off the uncollectible accounts for $12,000.
c. The company collected the receivable of $4,000 that had been written off previously.
Required -
(1) Prepare journal entries to record the above three transactions.
(2) Assume that 1.5% of the company's accounts receivable cannot be collected, prepare journal entry to record bad debt expense at the end of 20X2.
Question 2 - On January 1, 20X1, the company received a $10,000 three-year note bearing interest at 10% annually. The annual interest is received at each December 31. The market interest rate is 12% annually. September 30 is the company's reporting date. The company used the effective interest method to account for this long-term note receivable.
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Cash Received
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Interest Income
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Discount Amortized
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Carrying Amount
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Jan 1, 20x1
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9,520
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Dec 31, 20x1
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1,000
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1,142
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142
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9,662
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Dec 31, 20x2
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1,000
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1,159
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159
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9,821
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Dec 31, 20x3
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1,000
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1,179
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179
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10,000
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Required - Prepare journal entries on September 30, 20X2, and December 31, 20X2 (Note: round to the nearest dollar).
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