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Toronto Corporation records its sales at their gross amount. On December 31, 2015, Toronto Corporations balance sheet included the following:

Trade accounts receivable $630,000

Allowance for doubtful accounts (49,500)

Accounts receivable, net $580,500

During 2016, the following transactions occurred:

1. New sales on account $967,000
2. Collections on past credit sales 913,000
3. Accounts receivable written off as uncollectible 31,400
4. Collection of accounts previously written off as uncollectible 1,200
5. At year-end, the company estimated that a balance of $45,700

is needed in its allowance for doubtful accounts

Required:

1. Prepare journal entries to record each of the above transactions

2. Compute the net realizable value of accounts receivable that should appear on Torontos December 31, 2016 balance sheet

Part B

Maxwell Corporation factored, with recourse, $300,000 of accounts receivable with Huskie Financing. The finance charge is 4%, and 6% was retained to cover sales discounts, sales returns, and sales allowances. Maxwell estimates the recourse obligation at $5,800.

Required:

Prepare Maxwells journal entry to record this factoring of its accounts receivable.

Part C

On December 31, 2016, Geosue Company finished consultation services for Nolan Corporation and accepted in exchange a promissory note with a face value of $900,000, a due date of December 31, 2019, and a stated rate of 7%, with interest receivable at the end of each year. The fair value of the services is not readily determinable and the note is not readily marketable. However, a similar note is considered to have a market rate of interest of 9%.

Required:

1. Determine the present value of the note.

2. Prepare an effective interest amortization schedule for Geosue relative to this note. (Round to whole dollars.)

Part D

Nicholas Company loaned $68,587 to Nathan, Inc. in exchange for Nathans 2-year, $80,000, zero-interest-bearing note. Nathans incremental borrowing rate for comparable debt is 8%.

Required:

1. Prepare an effective interest amortization schedule for Nicholas relative to this note. (Round to whole dollars.)

2. Prepare Nicholas journal entries for the initial loan transaction, recognition of interest each year, and the collection of the note at maturity.

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