Appomatix sells fertilizer and pesticide to wholesalers. The company fiscal year
ID: 2453480 • Letter: A
Question
Appomatix sells fertilizer and pesticide to wholesalers. The company fiscal year end is December 31. during 2016, the following transactions related to receivables occurred:
March 31 Sold merchandise to the Misthos co and accepted a noninterest bearing note with a discount rate of 10%. The $12,000 payment is due on March 31, 2017
April 12 Sold merchandise to Able Co. for $10,000 with terms 2/10, n30, Appomatix uses the gross method to account for cash discounts
April 27 A customer returned merchandise costing Appomatix $6,000 Appomatix reduced the customer’s receivable balance by $8,000 the sales price of the merchandise. The company records sales returns as they occur
May 30 Transferred receivables of $100,000 to a factor without recourse. The factor change Appomatix a 2% finance charge on the receivables transferred. The sales criteria are met
July 31 Sold merchandise to Favre Corporation for $15,000 and accepted an 8%, 6-month note. 8% is an appropriate rate of this type of note.
Sept 30 Discounted the Favre Corporation note at the bank. The bank’s discount rate is 12%. The note was discounted without recourse
Required:
#1 Prepare the necessary jpurnal entries for Appomatix for each of the above dates. For transactions involving the sale of merchandise, ignore the entry for the cost of good (round all calculations to the nearest dollar)
#2 Prepare any necessary adjusting entries at December 31,2016. Adjusting entries are only recorded at year- end (round all calculations to the nearest dollar)
Explanation / Answer
Solution-1
Date
Account Titles & Explanation
Debit
Credit
March-31
Notes receivables (face value)
$12,000
Discount on note receivable ($12,000 x 10%)
$1,200
Sales revenue (revenue)
$10,800
March-31
Discount on note receivable
$1,200
Interest revenue
$1,200
Cash
$12,000
Notes receivable (face value)
$12,000
April-12
Accounts receivable
$10,000
Sales revenue
$10,000
April-27
Sales Return
$6,000
Inventory
$2,000
Accounts receivable
$8,000
May-30
Cash ($100,000*98%)
$98,000
Loss on sale of receivable ($100,000*2%)
$2,000
Account receivable
$100,000
Solution-2
There are no adjusting entries to be made for December.
Date
Account Titles & Explanation
Debit
Credit
March-31
Notes receivables (face value)
$12,000
Discount on note receivable ($12,000 x 10%)
$1,200
Sales revenue (revenue)
$10,800
March-31
Discount on note receivable
$1,200
Interest revenue
$1,200
Cash
$12,000
Notes receivable (face value)
$12,000
April-12
Accounts receivable
$10,000
Sales revenue
$10,000
April-27
Sales Return
$6,000
Inventory
$2,000
Accounts receivable
$8,000
May-30
Cash ($100,000*98%)
$98,000
Loss on sale of receivable ($100,000*2%)
$2,000
Account receivable
$100,000
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