8. The following series of transactions occurred during 2014 and 2015 when The V

Question

8. The following series of transactions occurred during 2014 and 2015 when The Virginia Co. sold merchandise to John Smith. The Virginia Company's annual accounting period ends on December 31 Sold $25,000 of merchandise to John Smith, terms 2/10, n/30. The merchandise had cost The Virginia Company $18,000 1001/14 /14 Smith reported that he cannot pay the account until early next year. He agreed to exchange the account for a 120-day, 10% note receivable. 12/31/14 Prepared the adjusting journal entry to record accrued interest on the note. n3/1515 The inginia Company received a check from Smith for the maturity value (with interest) of the note The Virginia Company received notification that Smith's check is being returned for non-sufficient funds (NSF 03/2215 12/31/15 The Virginia Company writes off Smith's account as uncollectible Prepare use the allowance method of accounting for uncollectible accounts. The Virginia Company's jounal entries to record the above transactions assuming they Debit Credit 1o1/14 11/15/14 12/31/14 3/15/15 3/22/15 12/31/15

Explanation / Answer

Journal Entries :-

Date Particulars Debit ($) Credit ($) 01/10/14 Accounts Receivable 25000 To Sales 25000 15/11/14 Note Receivable 25000 To Accounts Receivable 25000 31/12/14 Interest Receivable(25000*10% * 1.5/12) 312.5 To Interest Income 312.5 15/03/15 Cash 25833.33 To Interest Income(25000*10% * 2.5/12) 520.83 To Note Receivable 25000 To Interest receivable 312.5 22/3/15 Accounts Receivable 25000 Interest Receivable 833.83 To Cash 25833.33 31/12/15 Bad Debts Written off 25833.33 To Accounts Receivable 25000 To Interest Receivable 833.33

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