Weldon Corporation’s fiscal year ends December 31. The following is a list of tr

Question

Weldon Corporation’s fiscal year ends December 31. The following is a list of transactions involving receivables that occurred during 2018:

Required:

1 & 2. Prepare journal entries for each of the above transactions and additional year-end adjusting entries indicated. (Do not round your intermediate calculations. Round your final answers to the nearest whole dollar. If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Mar. 17 Accounts receivable of $2,700 were written off as uncollectible. The company uses the allowance method. 30 Loaned an officer of the company $30,000 and received a note requiring principal and interest at 6% to be paid on March 30, 2019. May 30 Discounted the $30,000 note at a local bank. The bank’s discount rate is 7%. The note was discounted without recourse and the sale criteria are met. June 30 Sold merchandise to the Blankenship Company for $22,000. Terms of the sale are 2/10, n/30. Weldon uses the gross method to account for cash discounts. July 8 The Blankenship Company paid its account in full. Aug. 31 Sold stock in a nonpublic company with a book value of $6,000 and accepted a $7,800 noninterest-bearing note with a discount rate of 7%. The $7,800 payment is due on February 28, 2019. The stock has no ready market value. Dec. 31 Bad debt expense is estimated to be 2% of credit sales for the year. Credit sales for 2018 were $800,000.

Explanation / Answer

Answer

Journal entries for each of the above transactions and additional year-end adjusting entries indicated:

Date Particulars Dr Cr 17-Mar Allowance for uncollectible a/c 2700 Accounts receivable 2700 30-Mar Note receivable 50000 Cash 50000 May 30 Interest Receivable 3375 Interest Revenue (50,000 x 9% x 9/12) 3375 Cash 53375 Note receivable(50000+3375) 53375 June 30 Accounts receivable 22000 Sales revenue 22000 8-Jul Cash (22,000 x 98%) 21560 Sales discounts (22,000 x 2%) 440 Accounts receivable 22000 (payment under terms of the sale are 2/10, n/30) Aug. 31 Notes receivable 7800 Discount on note receivable(7800-7540) 260 Investments (book value) 6000 Gain on sale of investments (diff) 1540 PV factor = (1/(1+0.07)^6/12)*$7800 = 0.96673648904*$7800 = $7540 Dec. 31 Bad debt expense ($800,000 x 2%) 16000 Allowance for uncollectible accounts 16000

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