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Aardvark, Inc.

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Aardvark, Inc. began 2010 with the following receivables related account balances;Accounts receivable $575,000;Allowance for uncollectibles 43,250;Aardvark?s transactions during 2010 include the following;1. On April 1, 2010, Aardvark accepted an 8%, 12-month note from Smith Bros. in settlement of a past due account of $17,775.;2. Aardvark finally ceased all efforts to collect $23,200 from various customers and wrote off their accounts.;3. Total sales for the year (80% on credit) were $1,765,000. Cash receipts from customers as reported on Aardvark?s cash flow statement were $1,925,000.;4. Sales for 2010 reported above included $100,000 of merchandise Jensen, Inc. ordered from Aardvark. Unfortunately, a shipping department error resulted in items valued at $150,000 being shipped and invoiced to Jensen. Because Jensen believed that they could eventually use the unordered items, they agreed to keep them in exchange for a 10% reduction in their price to cover storage costs.;5. On February 1, 2010, Aardvark borrowed $65,000 from Sun Bank and pledged receivables in that amount as collateral for the loan. Interest of 5% was deducted from the cash proceeds. In June, Aardvark repaid the loan.;6. Aardvark estimates uncollectible accounts using the sales revenue approach. In past years, bad debt expense was estimated at 1% of gross sales revenue, but a weaker economy in 2010 leads management to increase the estimate to 1.5% of gross sales revenue.;7. On July 1, 2010, Aardvark sold equipment to Zebra Company and received a $100,000 non-interest-bearing note receivable due in three years. The equipment normally sells for $79,383. Assume the appropriate rate of interest for this transaction is 8%.;1. Prepare journal entries for each of these events. Also prepare any needed entries to accrue interest on the notes at December 31. 2010.;2. Show Aardvark?s balance sheet presentation for accounts and notes receivable at December 31, 2010.

 

Paper#79488 | Written in 18-Jul-2015

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