Practice Exam - Chapter 7
Reporting & Analyzing Receivables and Investments
Dr. Fred Barbee
Solution to Short-Problem #3
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ACCT 201 Principles of Financial Accounting Practice Exam - Chapter 7 Reporting & Analyzing Receivables and Investments Dr. Fred Barbee Solution to Short-Problem #3 |
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Short Problem #3
Prepare journal entries for the following transactions of Viking Company:
| April 1 | Sold $2,500 of merchandise to Arthur Co., receiving a 10%, 90-day, $2,500 note. |
| April 15 | Wrote off $1,500 owed by Network Company. (The allowance method of accounting for bad debts is used.) |
| April 30 | Received a$6,800, 12%, 30-day note receivable from Calvin Company in exchange for its $6,800 account receivable. |
| May 30 | The note received from Calvin on April 30 was collected in full. |
| July 15 | Network Company paid $1,000 of the amount written off on April 15. |
Solution
| Notes Receivable | 2,500 |
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| Sales | 2,500 |
| Allowance for Doubtful Accounts | 1,500 |
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| Accounts Receivable - Network | 1,500 |
| Notes Receivable | 6,800 |
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| Accounts Receivable - Calvin | 6,800 |
| Cash | 6,868 |
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| Notes Receivable | 6,800 |
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| Interest Revenue ($6,800 x .12 x 30/360) | 68 |
| Accounts Receivable - Network | 1,000 |
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| Allowance forDoubtful Accounts | 1,000 |
| Cash | 1,000 |
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| Accounts Receivable - Network | 1,000 |