Stella Company (ST) is a private company that follows ASPE and has a December 31 year...

 

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Stella Company (ST) is a private company that follows ASPE and has a December 31 year end. ST has elected to use the effective interest method to amortize any discounts or premiums on notes receivable. ST's trial balance before adjustments shows the following selected account balances at December 31, 2020: Cr. Dr. 1,214,000 Accounts receivable Allowance for doubtful accounts Note receivable from Sunny Inc. (Note 1) 32,937 Note 1: On April 1, 2020, ST received a four-year, $50,000 zero-interest bearing note in payment of goods sold to Sunny Inc. Present value of note is $32,937 and implied interest rate on this note is 11%. 13,350 Following transactions have not been recorded yet: a) ST recently determined that a receivable from Jones Corporation is uncollectible. The $4,500 receivable had been recorded by ST on November 5, 2020. b) Before closing on December 31, 2020, ST received a $12,000 certified cheque from its former customer, Smith Industries. ST had previously written off Smith's $12,000 account receivable as it was determined to be uncollectible. c) ST factored some accounts receivable at the end of the year. Accounts totalling $300,000 were transferred to Jasper Finance Inc., with recourse. Jasper will receive the collection from these specific customers and has retained 5% of the balances to cover probable adjustments. ST was assessed a 3% finance charge on this transfer. Estimated recourse obligation is $7,000. ST has determined that the allowance for doubtful accounts should be 4% of adjusted gross accounts receivable at December 31, 2020. Required Provide journal entries to record transactions a), b), c), adjusting journal entry for bad debt expense and any other adjusting entry required for December 31, 2020. Stella Company (ST) is a private company that follows ASPE and has a December 31 year end. ST has elected to use the effective interest method to amortize any discounts or premiums on notes receivable. ST's trial balance before adjustments shows the following selected account balances at December 31, 2020: Cr. Dr. 1,214,000 Accounts receivable Allowance for doubtful accounts Note receivable from Sunny Inc. (Note 1) 32,937 Note 1: On April 1, 2020, ST received a four-year, $50,000 zero-interest bearing note in payment of goods sold to Sunny Inc. Present value of note is $32,937 and implied interest rate on this note is 11%. 13,350 Following transactions have not been recorded yet: a) ST recently determined that a receivable from Jones Corporation is uncollectible. The $4,500 receivable had been recorded by ST on November 5, 2020. b) Before closing on December 31, 2020, ST received a $12,000 certified cheque from its former customer, Smith Industries. ST had previously written off Smith's $12,000 account receivable as it was determined to be uncollectible. c) ST factored some accounts receivable at the end of the year. Accounts totalling $300,000 were transferred to Jasper Finance Inc., with recourse. Jasper will receive the collection from these specific customers and has retained 5% of the balances to cover probable adjustments. ST was assessed a 3% finance charge on this transfer. Estimated recourse obligation is $7,000. ST has determined that the allowance for doubtful accounts should be 4% of adjusted gross accounts receivable at December 31, 2020. Required Provide journal entries to record transactions a), b), c), adjusting journal entry for bad debt expense and any other adjusting entry required for December 31, 2020.

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