Schneider Company has a May 31 fiscal year end and adjusts accounts annually. Selected transactions in the year included the following:
Jan. 2 Sold $24,000 of merchandise to Sapounas Company, terms n/30. The cost of the goods sold was $14,400. Schneider uses the perpetual inventory system.
Feb. 1 Accepted a $24,000, five-month, 5% promissory note from Sapounas 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 Hoffman Co., terms n/30. The cost of the merchandise sold was $7,200.
April 15 Collected the amount owing from Hoffman Co. in full.
May 15 Collected the Garrison note in full. (See February 15 transaction.)
31 Accrued interest at year end.
July 1 Sapounas Company dishonoured its note of February 1. The company is bankrupt and there is no hope of future settlement.
13 Sold $6,000 merchandise costing $3,600 to Weber Enterprises and accepted Weber's $6,000, three- month, 7% note for the amount due, with interest payable at maturity.
Oct. 13 The Weber Enterprises note was dishonoured. (See July 13 transaction.) It is expected that Weber 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 Schneider Company accepting notes receivable from its customers?