Reference no: EM132504949

Accounts Receivable

The December 31 Balance Sheet of Twin Peaks Inc includes the following for the company's receivables:

Accounts receivable from customers $890,000

Less: Allowance for doubtful accounts 20,000

Required:

Record the following events in the form of general journal entries:

a. $11,800 in accounts receivable were written off as uncollectible.

b. $1,400 of accounts written off was unexpectedly collected in full (use 2 entries to record these events).

c. An aging of accounts receivable at January 31 indicated the need for a $22,000 allowance for doubtful accounts. You should consider also the above to calculate the balance of the Allowance a/c)

Note: Show your calculations

Notes payable and accrued interest

During the fiscal year ended 31 December, Black Crows Ltd carried out the following transactions involving notes payable:

Aug. 6 Borrowed $11,200 from The Doors Ltd issuing to them a 45-day, 5% note payable.

Sep. 16 Purchased office equipment from Sofa Ltd. The invoice amount was $16,800 and Sofa Ltd agreed to accept as full payment a 5%, 3-month note for the invoice amount.

Sep. 20 Paid the note payable due to The Doors Ltd plus accrued interest.

Nov. 1 Borrowed $235,000 from Bank of Cyprus at an interest rate of 5% per annum; signed a 90-day note payable.

Dec. 1 Purchased merchandise in the amount of $3,000 from Helios Ltd. Gave in settlement a 90-day interest bearing note at 6%.

Dec. 16 The $16,900 note payable to Sofa Ltd matured. The company paid the interest accruing and issued a new 30-day 5% note to replace the maturing note.

Required:

Question a. Prepare journal entries to record the above transactions.

Question b. Prepare the adjusting entry needed at 31 December to accrue interest owed on notes payable. Assume that adjusting entries are made annually (you can use 1 entry for all 3 notes).