Exercise 7-26 On December 31, 2014, Iva Majoli Company borrowed $65,643 from Par

Question

Exercise 7-26 On December 31, 2014, Iva Majoli Company borrowed $65,643 from Paris Bank, signing a 5-year, $101,000 zero-interest-bearing note. The note was issued to yield 9% interest. Unfortunately, during 2016, Majoli began to experience financial difficulty. As a result, at December 31, 2016, Paris Bank determined that it was probable that it would receive back only $75,750 at maturity. The market rate of interest on loans of this nature is now 10% Your answer is partially correct. Try again. Prepare the entry to record the issuance of the loan by Paris Bank on December 31, 2014. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and final answers to 0 decimal places, e.g. 5,275. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.) Date Account Titles and Explanation Notes Payable Cash Debit Credit December 31, 2014 101,000 Loss on Sale of Receivable SHOW LIST OF ACCOUNTS LINK TO TEXT Your answer is partially correct. Try again. Prepare the entry to record the impairment of the loan on December 31, 2016, by Paris Bank. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and final answers to 0 decimal places, e.g. 5,275. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit December 31, 2016 TBad Debt Expense Allowance for Doubtful Acc

Explanation / Answer

In the Books of paris bank 31-Dec-14 Notes Receivable A/c - ---- Dr 101000      To Cash 65643       To Un earned Inerest 35357 (Being loan given to Iva majoli and accepted the 5 years     zero interest rate note) 31-Dec-16 Bad debts account --- Dr 25250     Allowance for Doubtful debts 25250 (Being Bad debts entry passed on un relaised note amount )     (101000-75750)

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