Ku Company has an April 30 fiscal year end and adjusts accounts annually. Selected transactions in the year included the following:
Jan. 2 Sold $24,000 of merchandise to Richards Company, terms n/30. The cost of the goods sold was $14,400. Ku uses the perpetual inventory system.
Feb. 1 Accepted a $24,000, four-month, 5% promissory note from Richards Company for the balance due. (See January 2 transaction.) Interest is payable at maturity.
15 Sold $15,000 of merchandise costing $9,000 to Garrison Company and accepted Garrison's three-month, 5% note in payment. Interest is payable at maturity.
Mar. 15 Sold $12,000 of merchandise to Mantha Co., terms n/30. The cost of the merchandise sold was $7,200.
Apr. 30 Accepted a $12,000, two-month, 7% note from Mantha Co. for its balance due. Interest is payable at maturity. (See March 15 transaction.) 30 Accrued interest at year end.
May 15 Collected the Garrison note in full. (See February 15 transaction.) June 1 Collected the Richards Company note in full. (See February 1 transaction.) June 30 Mantha Co. dishonours its note of April 30. Mantha Co. is bankrupt and there is no hope of future settlement.
July 13 Sold $6,000 merchandise costing $3,600 to Zorilla Inc. and accepted Zorilla's $6,000, three-month, 7% note for the amount due, with interest payable at maturity.
Oct. 13 The Zorilla Inc. note was dishonoured. (See July 13 transaction.) It is expected that Zorilla will eventually pay the amount owed.
Instructions
Record the above transactions. (Round calculations to the nearest dollar.)
TAKING IT FURTHER
What are the advantages and disadvantages of Ku Company accepting notes receivable from its customers?