assume sales were on account 20 Record bad debts of 8000 di

, assume sales were on account). 20. Record bad debts of $8,000 (direct method). 21. Write off $18,000 of accounts receivable (allowance method). 22. Adjust the allowance for doubtful accounts from $22,000 to $78,000 (allowance method). Acquired a two-year zero-interest note from borrower (face value $10,000,PV- $7,972). 23. 24. Accrue interest earned after one year on the above note (assume a 12% discount rate).

Solution

Journal Entry Date Particulars Dr. Amt. Cr. Amt. 19 Sales Return & Allowances          130,000 Accounts Receivable          130,000 (record the sales returns) 20 Bad Debt Expenses              8,000 Accounts Receivable              8,000 (record the bad debt expenses) 21 Allowance for Doubtful Accounts            18,000 Accounts Receivable            18,000 (record the amount written off) Assuming Entry No 21 is not related to Entry No 22 22 Bad Debt Expense            56,000 Allowance for Doubtful Accounts            56,000 (record the Bad Debt Expenses) Bad Debt Expenses = $78,000 - $22,000 = $56,000 If Entry No 21 is related to Entry No 22 22 Bad Debt Expense            74,000 Allowance for Doubtful Accounts            74,000 (record the Bad Debt Expenses) Bad Debt Expenses = $78,000 + $18,000 - $22,000 = $74,000 23 Notes Payable            10,000 Cash              7,972 Unearned Interest Revenue              2,028 (record the purchase of zero interest note) 24 Unearned Interest Revenue                  957 Interest Revenue                  957 (record the Imputation of Interest Revenue) Interest Revenue = $7,972 X 12% = $956.64 or say $957