2. The following series of transactions occurred during Year 1 and Year 2, respectively when Woods...

 

Transcribed Image Text:

2. The following series of transactions occurred during Year 1 and Year 2, respectively when Woods Co. sold merchandise to JM Enterprise. Woods Co. annual accounting period ends on 31 December. (Using 365 days to a year and round-up answer to nearest dollars). Date 1 Oct Yr1 15 Nov Yr1 Particulars Sold RM12,000 of merchandise to JM Enterprise, terms 2/10, n/30. JM Enterprise reports that he cannot pay the account until early next year. He agrees to exchange the account for a 120-day 12% note receivable. 15 Mar Yr2 19 Mar Yr2 31 Dec Yr2 Instructions: (i) Prepare the adjusting journal entry to record accrued interest on the note at 31 Dec Year1. (1 marks) (ii) Prepare Woods Co.'s journal entries to record the above transactions. The company uses the allowance method to account for its bad debt expense. (6 marks) (Total: 25 marks) Woods Co. receives a cheque from JM Enterprise for the maturity value (with interest) of the note. Woods Co. checked with the Bank and discovered that JM Enterprise cheque is being returned for nonsufficient funds (NSF). Woods Co. writes off JM Enterprise's account as uncollectible. 2. The following series of transactions occurred during Year 1 and Year 2, respectively when Woods Co. sold merchandise to JM Enterprise. Woods Co. annual accounting period ends on 31 December. (Using 365 days to a year and round-up answer to nearest dollars). Date 1 Oct Yr1 15 Nov Yr1 Particulars Sold RM12,000 of merchandise to JM Enterprise, terms 2/10, n/30. JM Enterprise reports that he cannot pay the account until early next year. He agrees to exchange the account for a 120-day 12% note receivable. 15 Mar Yr2 19 Mar Yr2 31 Dec Yr2 Instructions: (i) Prepare the adjusting journal entry to record accrued interest on the note at 31 Dec Year1. (1 marks) (ii) Prepare Woods Co.'s journal entries to record the above transactions. The company uses the allowance method to account for its bad debt expense. (6 marks) (Total: 25 marks) Woods Co. receives a cheque from JM Enterprise for the maturity value (with interest) of the note. Woods Co. checked with the Bank and discovered that JM Enterprise cheque is being returned for nonsufficient funds (NSF). Woods Co. writes off JM Enterprise's account as uncollectible.

Answer rating: 100% (QA)

Question 1 Debit Interest Receivable 1440 Credit Interest Revenue 1440 The adjusting journal entry to record accrued interest on the note at 31 Dec Ye... View the full answer