Question 9.IP: Ditzler Company, a construction supply company, uses the all......

Financial Accounting [EXP-43430]

Ditzler Company, a construction supply company, uses the allowance method of accounting for uncollectible accounts receivable. Selected transactions completed by Ditzler Company are as follows:

Feb. 1. Sold merchandise on account to Ames Co., $8,000. The cost of the merchandise sold was $4,500.

Mar. 15. Accepted a 60-day, 12% note for $8,000 from Ames Co. on account.

Apr. 9. Wrote off a $2,500 account from Dorset Co. as uncollectible. 21. Loaned $7,500 cash to Jill Klein, receiving a 90-day, 14% note.

May 14. Received the interest due from Ames Co. and a new 90-day, 14% note as a renewal of the loan. (Record both the debit and the credit to the notes receivable account.)

June 13. Reinstated the account of Dorset Co., written off on April 9, and received $2,500 in full payment.

July 20. Jill Klein dishonored her note.

Aug. 12. Received from Ames Co. the amount due on its note of May 14. 19. Received from Jill Klein the amount owed on the dishonored note, plus interest for 30 days at 15%, computed on the maturity value of the note.

Dec. 16. Accepted a 60-day, 12% note for $12,000 from Global Company on account.

31. It is estimated that 3% of the credit sales of $1,375,000 for the year ended December 31 will be uncollectible.

Instructions

1. Journalize the transactions.
2. Journalize the adjusting entry to record the accrued interest on December 31 on the Global Company note.

Step-by-Step

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Feb.	1	Accounts Receivable—Ames Co.	8,000.00
		Sales		8,000.00
	1	Cost of Merchandise Sold	4,500.00
		Merchandise Inventory		4,500.00
Mar.	15	Notes Receivable—Ames Co.	8,000.00
		Accounts Receivable—Ames Co.		8,000.00
Apr.	9	Allowance for Doubtful Accounts	2,500.00
		Accounts Receivable—Dorset Co.		2,500.00
	21	Notes Receivable—Jill Klein	7,500.00
		Cash		7,500.00
May	14	Notes Receivable—Ames Co.	8,000.00
		Cash	160.00
		Notes Receivable—Ames Co.		8,000.00
		Interest Revenue		160.00
June	13	Accounts Receivable—Dorset Co.	2,500.00
		Allowance for Doubtful Accounts		2,500.00
	13	Cash	2,500.00
		Accounts Receivable—Dorset Co.		2,500.00
July	20	Accounts Receivable—Jill Klein	7,762.50
		Notes Receivable—Jill Klein		7,500.00
		Interest Revenue		262.50
Aug.	12	Cash	8,280.00
		Notes Receivable—Ames Co.		8,000.00
		Interest Revenue		280.00
	19	Cash	7,859.53
		Accounts Receivable—Jill Klein		7,762.50
		Interest Revenue		97.03
		($7,762.50 × 15% × 30/360).
Dec.	16	Notes Receivable—Global Company	12,000.00
		Accounts Receivable—Global Company		12,000.00
	31	Bad Debt Expense	41,250.00
		Allowance for Doubtful Accounts		41,250.00
		Uncollectible accounts estimate
		($1,375,000 × 3%).