Practice Problems

Complete the practice problems. Check your answers after you finish.

Demonstration problem

Demonstration problem A 

a. Prepare the journal entries for the following transactions:

As of the end of 2010, Post Company estimates its uncollectible accounts expense to be 1 percent of sales. Sales in 2010 were USD 1,125,000.

On 2011 January 15, the company decided that the account for John Nunn in the amount of USD 750 was uncollectible.

On 2011 February 12, John Nunn's check for USD 750 arrived.

b. Prepare the journal entries in the records of Lyle Company for the following:

On 2010 June 15, Lyle Company received a USD 22,500, 90-day, 12 percent note dated 2010 June 15, from Stone Company in payment of its account.

Assume that Stone Company did not pay the note at maturity. Lyle Company decided that the note was uncollectible.

Demonstration problem B 

a. Prepare the entries on the books of Cromwell Company assuming the company borrowed USD 10,000 at 7 percent from First

National Bank and signed a 60-day non interest-bearing note payable on 2009 December 1, accrued interest on 2009 December 31, and paid the debt on the maturity date.

b. Prepare the entries on the books of Cromwell Company assuming it purchased equipment from Jones Company for USD 5,000 and signed a 30-day, 9 percent interest-bearing note payable on 2010 February 24. Cromwell paid the note on its maturity date.

Source: Textbook Equity,
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