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1. On December 31, 20X1, the company reported a debit balance of $100,000 in accounts receivable and a credit balance of $1,500 in the allowance for doubtful accounts. December 31 is the companys reporting date. During 20X2, the company had the following transactions:

a. The company made a credit sale of $400,000.

b. The company wrote off the uncollectible accounts for $14,000.

c. The company collected the receivable of $6,000 that had been written off previously.

Required (10 marks):

(1) Prepare journal entries to record the above three transactions.

(2) Assume that 1% of the companys accounts receivable cannot be collected, prepare journal entry to record bad debt expense at the end of 20X2.

2. On January 1, 20X1, the company received a $10,000 three-year note bearing interest at 10% annually. The annual interest is received at each December 31. The market interest rate is 12% annually. November 30 is the companys reporting date. The company used the effective interest method to account for this long-term note receivable.

Cash Received Interest Income Discount Amortized Carrying Amount

Jan 1, 20x1 9,520

Dec 31, 20x1 1,000 1,142 142 9,662

Dec 31, 20x2 1,000 1,159 159 9,821

Dec 31, 20x3 1,000 1,179 179 10,000

Required (7 marks):

Prepare journal entries on November 30, 20X2, and December 31, 20X2 (Note: round to the nearest dollar).

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