Question;Chapter 07 Homework SpreadsheetMartell Distilleries, Inc. is a wholesale liquor distributor across seven counties. It sells its products to customers on a credit basis. The overwhelming majority of its sales transactions are on open, 30-day net terms. By law, returns and exchanges are not permitted on the sale of alcohol. Occasionally, for large transactions, or with customers who do not wish to apply for revolving terms, Martell will require a written promissory note as evidence of indebtedness. In accordance with Generally Accepted Accounting Principles, Martell accounts for all of its receivables, both written and oral, on a net realizable basis. Martell closes its books at the end of the calendar year.An adjusting entry for bad debt is recorded annually on December 31st.On December 31, 2012, Martell?s Balance Sheet disclosed the following with respect to receivables:MARTELL DISTILLERIES, INC.Balance Sheet (Partial)December 31, 2012Current AssetsAccounts ReceivableLess: Allowance for Uncollectible Accounts$462,00030,000During 2013, sales on open account were $1,750,000, cash collections on revolving accounts were $1,830,000, and$35,000 in specific accounts were written off as uncollectible. Also, $3,000 was collected from a customer whoseaccount was written off in early 2012. In addition to the summary of routine receivables transactions above, thefollowing specific transactions occurred during 2013:Feb. 28Mar. 31Apr. 30Jun. 30Sold a pallet of rare Dornish Cabernet to Lorathii Trading Company for $10,000, andaccepted a 7-month, 10% Note, with both principal and interest due at maturity onSeptember 30th. Martell?s cost of capital is 10%, which is also the market rate fortransactions of this duration and risk.Sold summer ale to Volantis Brewhaus, and accepted a non-interest bearing Note in theamount of $8,000, due in two year?s time. Martell judges the risk associated with thistransaction as equal to that with the Lorathii Trading Company.Transferred receivables of $100,000 to Arren Factoring Corporation without recourse.Arren charges a 2.5% finance charge of the receivables exchanged. The transfer meets thecriterion established ASC 860-10-40.Discounted its Note with the Lorathii Trading Company to the Bank of Westeros withoutrecourse. The Bank of Westeros offers discount terms of 12% (Hint: accrue interest on theNote prior to its discounting).An aging of Martell?s open Accounts Receivable at December 31, 2013 reveals the following:AGE GROUP0 to 60 Days61 to 90 Days91 to 120 DaysOver 120 DaysPERCENTAGE OF YEAR-ENDRECEIVABLES IN GROUP65 %10%5%PERCENTUNCOLLECTIBLE4%15%%40%In addition to the above aging schedule, Martell?s Comptroller, Arianne Martell, processes a routine credit checkon Volantis Brewhaus, judging the risk of default on its Note as negligible, and elects not to impair the Note,maintaining the current discount schedule.Continued on ReverseInstructions: 18.104.22.168.5.Prepare Summary General Journal entries for Martell?s routine receivabletransactions (sales, collections, and bad-debt related transactions).Journalize the specific receivable transactions occurring on February 28th, March31st, April 30th, and June 30th. Explanations are not required.Prepare all appropriate adjusting entries related to the interest-bearingreceivables. Explanations are not required.Prepare the appropriate adjusting entry for bad debt.Show the Balance Sheet presentation for Martell?s receivables at December 31,2013.
Paper#42969 | Written in 18-Jul-2015Price : $22