On January 2, 2017, Durand Co. had a $20,000, five-month, 6% note receivable from Vincent Company dated October 31, 2016. Interest receivable of $200 was accrued on the note on December 31, 2016. Interest on the note is due at maturity. Durand Co. has a December 31 fiscal year end and adjusts its accounts annually. In 2017, the following selected transactions occurred:
Jan. 2 Sold $25,000 of merchandise costing $13,750 to Braun Company, terms 2/10, n/30. Durand 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 trans- action.) Interest is due at maturity.
Mar. 31 Received payment in full from Vincent 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.) Future payment is not expected.
Nov. 30 Gave UOA Corp. a $10,000 cash loan and accepted UOA's four-month, 4.5% note. Interest is due at maturity.
Dec 31 Accrued interest is recorded on any outstanding notes at year end.
Instructions
Record the above transactions.
Taking It Further
Noah Inc. has recovered some of its financial health and would like to do business with Durand Co. once again; that is, by purchasing goods on credit. What should Durand Co. do? What conditions might Durand Co. put in its future agreements with Noah?