Chapter 16 1 Chapter 16 1-A Prepare journal entries for the following selected transaction of Dulcinea Company. 2010 Dec 13 Accepted a $9,500, 60-day, 8% note dated December 13 in granting Miranda Lee a time extension on her past due account receivable. Dec 31 Prepared an adjusting entry to record the accrued interest on the Lee note. 2011 Feb 11 Received Lee’s payment for principal and interest on the note dated December 13. Mar 3 Accepted a $5,000, 10%, 90-day note dated March 3 in granting a time extension on the past due account receivable of Tomas Company. 17 Accepted a $2,000, 30-day, 9% note dated March 17 in granting Hiroshi Cheng a time extension on his past-due account receivable. Apr 16 Cheng dishonors his note when presented for payment June 1 Received the Tomas payment for principal and interest on the note dated March 3. Problem 16-2A The following selection transaction is from Neil Martin Inc. 2010 Mar 2 Accepted a $6,120, 8%, 90-day note dated this day in granting a time extension on the past due account receivables from Midnight Co. 17 Accepted a $2,400, 30-day, 7% note dated this day in granting Ava Privet a time extension on per past-due account receivable. 16 Privet dishonored her note when presented for payment. June 2 Midnight Co. refuses to pay the note that was due to Neil Martin, Inc. on May 31. Prepare the journal entry to charge the dishonored note plus accrued interest to Midnight Co.’s accounts receivable. July 17 Received payment from Midnight Co. for the maturity value of its dishonored note plus interest for 46 days beyond maturity at 8%. Dec 1 Wrote off the Ava Privet account against Allowance for Doubtful Accounts. Chapter 16 2 Problem 16-3A On July 1, Whyte Co. accepted a $20,000, 90-day, 12% notes from Olson Inc. for the purchase of equipment. On July 31, Whyte discounts the note receivable at First Federal Savings. The bank charges a discount rate of 15%. Required 1. Record the journal entry for receipt of the note on July 1. 2. Record the journal entry for the discounted note receivable on July 31. Problem 16-4A On November 1, 2010, Norwood borrows $200,000 cash from a bank by signing a five-year installment note bearing 8% interest. The note requires equal annual payments of $50,091 each year on October 31. 1. Complete an amortization table for this installment note similar to the one in this example Debit Period Ending Date 1 12/31/2010 2 12/31/2010 3 12/31/2010 Beginning Principal Balance $ 60,000 51,821 42,988 Interest Expense 8% x A $ 4,800 4,146 3,439 4 12/31/2010 33,448 2,676 15,061 $ Debit P l u s Credit Credit Notes Payable B-D $ 8,179 8,833 9,540 Cash = (computed) $ 12,979 12,979 12,979 Ending Principal Balance A-C $ 51,821 42,988 33,448 10,303 36,855 12,979 51,916 23,145 151,402 $ $ $ Expense + Payables + Cash 2. Prepare the journal entries in which Norwood a. Records accrued interest as of December 31, 2010 (the need of its annual reporting Period), and then b. The first annual payment on the note.