Prefix Supply Company received a 120-day, 8% note for $450,000, dated April 9 from a customer on account.

Prefix Supply Company received a 120-day, 8% note for $450,000, dated April 9 from a customer on account.

a. Determine the due date of the note.
b. Determine the maturity value of the note.
c. Journalize the entry to record the receipt of the payment of the note at maturity.


Answer:















a. The due date for the note is August 7, determined as follows:
April…………………………………………………………………… 21 days (30 – 9)
May……………………………………………………………………. 31 days
June…………………………………………………………………… 30 days
July…………………………………………………………………….
August………………………………………………………….………
31 days
 7 days
Total…………………………………………………………………… 120 days
b. $462,000 [$450,000 + ($450,000 × 8% × 120/360)]
c. Aug. 7 Cash 462,000
Notes Receivable 450,000
Interest Revenue 12,000





At the end of the current year, Accounts Receivable has a balance of $3,460,000; Allowance for Doubtful Accounts has a debit balance of $12,500; and net sales for the year total $46,300,000. Using the aging method, the balance of Allowance for Doubtful Accounts is estimated as $245,000.

Determine (a) the amount of the adjusting entry for uncollectible accounts; (b) the adjusted balances of Accounts Receivable, Allowance for Doubtful Accounts, and Bad Debt Expense; and (c) the net realizable value of accounts receivable.


Answer:










a. $257,500 ($245,000 + $12,500)
b. Adjusted Balance
Accounts Receivable………………………………………………… $3,460,000
Allowance for Doubtful Accounts………………………………… 245,000
Bad Debt Expense……………………………………………………… 257,500
c. Net realizable value ($3,460,000 – $245,000)…………………… $3,215,000