Adjusting Entry, Notes Receivable, Financial Accounting Fundamentals – Practice
The key terms in this Financial Accounting Fundamentals include Notes Receivable, Adjusting Entry, Accrued Interest, Journal Entries, Principal, General Journal, Aging of Receivables Method, Bank Reconciliation, Financial Accounting Fundamentals
Notes receivable transactions
Following are selected transactions of Danica Company for 2016.
| Dec. | 13 | Accepted a $25,000, 45-day, 8% note dated December 13 in granting Miranda Lee a time extension on her past-due account receivable. | ||
| 31 | Prepared an adjusting entry to record the accrued interest on the Lee note. |
Complete the table to calculate the interest amounts at December 31st and use the calculated value to prepare your journal entries. (Do not round your intermediate calculations. Use 360 days a year.)
Complete this question by entering your answers in the tabs below.
Complete the table to calculate the interest amounts at December 31st.
| Interest | ||
| Total Through | Recognized | |
| Maturity | December 31 | |
| Principal | $25,000 | $25,000 |
| Rate (%) | 8% | 8% |
| Time | 45/360 | 18/360 |
| Total interest | $250 | $100 |
Complete this question by entering your answers in the tabs below.
Use the calculated value to prepare your journal entries.
| No | Date | General Journal | Debit | Credit |
| 1 | Dec 13, 2016 | Notes receivable—M. Lee | 25,000 | |
| Accounts receivable—M. Lee | 25,000 | |||
| 2 | Dec 31, 2016 | Interest receivable | 100 | |
| Interest revenue | 100 |
Exercise Aging of receivables method
Daley Company estimates uncollectible accounts using the allowance method at December 31. It prepared the following aging of receivables analysis.
| Days | Past | Due | ||||
| Total | 0 | 1 to 30 | 31 to 60 | 61 to 90 | Over 90 | |
| Accounts receivable | $ 595,000 | $ 401,000 | $ 95,000 | $ 41,000 | $ 23,000 | $ 35,000 |
| Percent uncollectible | 3% | 4% | 7% | 9% | 12% |
a. Complete the below table to calculate the estimated balance of Allowance for Doubtful Accounts using the aging of accounts receivable method.
b. Prepare the adjusting entry to record Bad Debts Expense using the estimate from part a. Assume the unadjusted balance in the Allowance for Doubtful Accounts is a $4,100 credit.
c. Prepare the adjusting entry to record bad debts expense using the estimate from part a. Assume the unadjusted balance in the Allowance for Doubtful Accounts is a $600 debit.
Complete this question by entering your answers in the tabs below.
Complete the below table to calculate the estimated balance of Allowance for Doubtful Accounts using the aging of accounts receivable method.
| Accounts Receivable | Percent Uncollectible (%) | |||||
| Not due: | 401,000 | x | 3% | = | $12,030 | |
| 1 to 30: | 95,000 | x | 4% | = | 3,800 | |
| 31 to 60: | 41,000 | x | 7% | = | 2,870 | |
| 61 to 90: | 23,000 | x | 9% | = | 2,070 | |
| Over 90: | 35,000 | x | 12% | = | 4,200 | |
| Estimated balance of allowance for uncollectibles | $24,970 | credit |
Complete this question by entering your answers in the tabs below.
Prepare the adjusting entry to record Bad Debts Expense using the estimate from part a. Assume the unadjusted balance in the Allowance for Doubtful Accounts is a $4,100 credit.
Prepare the adjusting entry to record bad debts expense using the estimate from part a. Assume the unadjusted balance in the Allowance for Doubtful Accounts is a $600 debit.
| No | Date | General Journal | Debit | Credit |
| 1 | Dec 31 | Bad debts expense | 20,870 | |
| Allowance for doubtful accounts | 20,870 | |||
| 2 | Dec 31 | Bad debts expense | 25,570 | |
| Allowance for doubtful accounts | 25,570 |
Del Gato Clinic deposits all cash receipts on the day when they are received and it makes all cash payments by check. At the close of business on June 30, 2017, its Cash account shows an $14,852 debit balance. Del Gato Clinic’s June 30 bank statement shows $15,351 on deposit in the ban
- Outstanding checks as of June 30 total $3,099.
- The June 30 bank statement lists a $75 service charge.
- Check No. 919, listed with the canceled checks, was correctly drawn for $389 in payment of a utility bill on June 15. Del Gato Clinic mistakenly recorded it with a debit to Utilities Expense and a credit to Cash in the amount of $398.
- The June 30 cash receipts of $2,534 were placed in the bank’s night depository after banking hours and were not recorded on the June 30 bank statement.
Bank reconciliation
Prepare a bank reconciliation for Del Gato Clinic using the above information:
| DEL GATO CLINIC | |||||
| Bank Reconciliation | |||||
| June 30, 2017 | |||||
| Bank statement balance | $15,351 | Book balance | $14,852 | ||
| Add: | Add: | ||||
| Deposit of June 30 | $2,534 | Error on Ck. No. 919 | $9 | ||
| 2,534 | 9 | ||||
| 17,885 | 14,861 | ||||
| Deduct: | Deduct: | ||||
| Outstanding checks | 3,099 | Bank service charge | 75 | ||
| 3,099 | 75 | ||||
| Adjusted bank balance | $14,786 | Adjusted book balance | $14,786 |