Exercise 8-12 Vandiver Company had the following select transactions. Apr. 1, 20

Question

Exercise 8-12 Vandiver Company had the following select transactions. Apr. 1, 2017 Accepted Goodwin Company’s 12-month, 10% note in settlement of a $65,000 account receivable. July 1, 2017 Loaned $67,000 cash to Thomas Slocombe on a 9-month, 8% note. Dec. 31, 2017 Accrued interest on all notes receivable. Apr. 1, 2018 Received principal plus interest on the Goodwin note. Apr. 1, 2018 Thomas Slocombe dishonored its note; Vandiver expects it will eventually collect. Prepare journal entries to record the transactions. Vandiver prepares adjusting entries once a year on December 31. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Record journal entries in the order presented in the problem.)

Explanation / Answer

April 01 2017 Goodwin Note Receivable a/c dr 65000

To Goodwin a/c receivable a/c 65000

(Being Account Goodwin receivable has been settled by accepting 12 month Note recievable along with 10% interest)

July 01 2017 Thomas Slocombe a/c receivable a/c dr 67000

To Cash / Bank a/c 67000

(Being Loaned amount recognised)

July 01 2017 Thomas Slocombe Note reveivable a/c dr 67000

To Thomas Slocombe a/c 67000

(Being 8% Note on a 9 month basis recieved for loaned amount)

31 Dec 2017 Goodwin a/c receivable a/c dr 4875

To Interest receivable on 10% Note a/c 4875

(Being accruing interest on 10% note-65000×10/100×9/12)

31 Dec 2017 Thomas Slocombe a/c receivable a/ c dr 2680

To Interest receivable on 8% note a/c 2680

( Being Interest accrued on 8 % Note-67000×8/100×6/12)

31 Dec 2017 Interest receivable on 10% note a/c dr 4875

Interest receivable on 8 % Note a/c dr 2680

To Profit and Loss a/c 7555

( Being transferred to Income statement)

April 01 2018 Cash / Bank a/c dr 71500

To Goodwin Note receivable a/c dr 65000

To Goodwin a/c receivable a/c 4875

To Interest received a/c 1625

(Being Interest plus principal recieved from Goodwin along with 3 months interest 65000×10/100×3/12)

April 01 2018 Thomas Slocombe a/c receivable a/c dr 68340

To Thomas Slocome Note receivable a/c 67000

To Interest receivable on 8% Note a/c 1340

(Being Thomas 8 % note dishonoured but it is expected to be collected along with interest and hence 3 months interest accrued- 67000×8/100×3/12 and total amount payable by Thomas is 71020)

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