Tardif Corporation adjusts its books monthly. On September 30, 2015, notes recei

Question

Tardif Corporation adjusts its books monthly. On September 30, 2015, notes receivable include the following:

Interest is due at maturity for the RES and Dragon notes. Interest is due on the first day of the month for the Ihara and MGH notes. At September 30, the balance in the Allowance for Doubtful Notes account is nil. In October, the following selected transactions were completed.

Issue Date Maker Principal Interest Term Mar. 31, 2015 RES Inc. $15,000 5% 7 months May 31, 2015 Ihara Ltd. 20,400 7% 18 months Aug. 31, 2015 Dragon Limited 5,500 6% 2 months Sept. 30, 2015 MGH Corp. 19,600 5% 16 months Date Account Titles and Explanation Debit Credit Oct. 1 Oct. 31 (To record dishonoured note; eventual collection expected) Oct. 31 (To record collection of note and interest) Oct. 31 To record accrual of interest) Oct. 31

Explanation / Answer

Date Account Tiltles and Explanation Debit Credit Oct 1 Cash $119.00              Interest Receivables $119.00 ($20,400 x 7% x 1/12 + $19,600 x 5% x 0/12) Oct 31 Accounts Receivable $5,555.00 Notes Receivables (Dragon ) $5,500.00 Interest Receivable ($5500 x 6% x 1/12) $27.50 Interest Revenue ($5500 x 6% x 1/12) $27.50 Oct 31 Cash $15,437.50 Notes Receivables $15,000.00 Interest Receivable ($15000 x 5% x 6/12) $375.00 Interest Revenue ($15000 x 5% x 1/12) $62.50 Oct 31 Interest Receivable ($119 + $62.50) $200.67 Interest Revenue $200.67 (Ihara = $20400 x 7% x 1/12) + ($19600 x 5% x 1/12) Oct 31 Bad debt Expenses $20,400.00 Allowance for Doubtful Notes $20,400.00

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