Question: On February 15 Harpool Inc sold equipment to Adams Corporation

On February 15, Harpool Inc. sold equipment to Adams Corporation on account for $40,000. On November 1, Harpool deemed the account uncollectible and wrote it off. On December 31, Adams offered Harpool a six-month, 10%, $40,000 promissory note in payment of its obligation, which Harpool accepted. Adams paid the principal and the interest at the maturity date. Harpool uses the allowance method for bad debts.
a. Prepare all of Harpool's necessary journal entries from the date of the equipment sale to the maturity date of the note. Ignore any effect on inventory or cost of goods sold.
b. What would be Adams' motives for offering a promissory note in settlement of such an old debt?

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  • CreatedJuly 16, 2015
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