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:
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Feb. 1
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Sold merchandise on account to Ames Co., $8,000. The cost of the merchandise
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sold was $4,500.
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Mar. 15
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Accepted a 60-day, 12% note for $8,000 from Ames Co. on account.
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Apr. 9
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Wrote off a $2,500 account from Dorset Co. as uncollectible.
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21
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Loaned $7,500 cash to Jill Klein, receiving a 90-day, 14% note.
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May 14
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Received the interest due from Ames Co. and a new 90-day, 14% note as a
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renewal of the loan. (Record both the debit and the credit to the notes receivable
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account.)
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June 13
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Reinstated the account of Dorset Co., written off on April 9, and received
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$2,500 in full payment.
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July 20
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Jill Klein dishonored her note.
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Aug. 12
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Received from Ames Co. the amount due on its note of May 14.
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19
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Received from Jill Klein the amount owed on the dishonored note, plus interest
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for 30 days at 15%, computed on the maturity value of the note.
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Dec. 16
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Accepted a 60-day, 12% note for $12,000 from Global Company on account.
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31
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It is estimated that 3% of the credit sales of $1,375,000 for the year ended
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December 31 will be uncollectible.
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Instructions
1. Journalize the transactions.
2. Journalize the adjusting entry to record the accrued interest on December 31 on the Global Company note.