On January 1, 2014, Alexi Co. had a $20,000, five-month, 6% note receivable from Figaro Company dated October 31, 2012. Interest receivable of $200 was accrued on the note on December 31, 2013. Alexi Co. has a December 31 fiscal year end and adjusts its accounts annually. In 2014, the following selected transactions occurred:
Jan. 2 Sold $25,000 of merchandise costing $13,750 to Braun Company, terms 2/10, n/30. Alexi Co. uses the perpetual inventory system.
Feb. 1 Accepted Braun Company's $25,000, three-month, 6% note for the balance due. (See January 2 transaction.) Interest is due at maturity.
Mar. 31 Received payment in full from Figaro Company for the amount due.
May 1 Collected Braun Company note in full. (See February 1 transaction.) 25 Accepted Noah Inc.'s $12,000, two-month, 6% note in settlement of a past-due balance on account. Interest is payable monthly.
June 25 Received one month's interest from Noah Inc. on its note. (See May 25 transaction.) July 25 The Noah Inc. note was dishonoured. (See May 25 transaction.) Noah Inc. is bankrupt and future payment is not expected.
Oct. 1 Loaned Martin Rowe, an employee, $4,000 on a four-month, 6% note. Interest is due at maturity.
Nov. 30 Gave UOA Corp. a $10,000 cash loan and accepted UOA's four-month, 4.5% note.
Dec. 1 Martin Rowe left for a job at another company. Alexi Co. asked him to immediately pay the note receivable. (See October 1 transaction.) Martin told the company that he does not have the money to do so.
31 Accrued interest is recorded on any outstanding notes at year end.
Instructions
Record the above transactions.
TAKING IT FURTHER
Do you think the note receivable from Martin Rowe should be written off as at the year end? If not, do you think interest should be accrued on this note receivable at year-end? What actions might the company have taken before Martin left the company to collect the note or part of it?