4. At year-end the Allowance for Doubtful Accounts was estimated to need a balance of $20,000. This estimate is based on an analysis of aged accounts receivable. Instructions Prepare all journal entries necessary to reflect the transactions above. P7-7 (Assigned Accounts Receivable—Journal Entries) Nikos Company finances some of its current operations by assigning accounts receivable to a finance company. On July 1, 2007, it assigned, under guarantee, specific accounts amounting to $100,000. The finance company advanced to Nikos 80% of the accounts assigned (20% of the total to be withheld until the finance company has made its full recovery), less a finance charge of 1 / 2 % of the total accounts assigned. On July 31 Nikos Company received a statement that the finance company had collected $55,000 of these accounts and had made an additional charge of 1 / 2 % of the total accounts outstanding as of July 31. This charge is to be deducted at the time of the first remittance due Nikos Company from the finance company. ( Hint : Make entries at this time.) On August 31, 2007, Nikos Company received a second state- ment from the finance company, together with a check for the amount due. The statement indicated that the finance company had collected an additional $30,000 and had made a further charge of 1 / 2 % of the bal- ance outstanding as of August 31. Instructions Make all entries on the books of Nikos Company that are involved in the transactions above. (AICPA adapted) P7-8 (Notes Receivable with Realistic Interest Rate) On October 1, 2007, Jeppo Farm Equipment Com- pany sold a pecan-harvesting machine to Lujan Brothers Farm, Inc. In lieu of a cash payment Lujan Broth- ers Farm gave Jeppo a 2-year, $100,000, 8% note (a realistic rate of interest for a note of this type). The note required interest to be paid annually on October 1. Jeppo’s financial statements are prepared on a calendar-year basis. Instructions Assuming Lujan Brothers Farm fulfills all the terms of the note, prepare the necessary journal entries for Jeppo Farm Equipment Company for the entire term of the note. P7-9 (Notes Receivable Journal Entries) On December 31, 2007, Menachem Inc. rendered services to Begin Corporation at an agreed price of $91,844.10, accepting $36,000 down and agreeing to accept the balance in four equal installments of $18,000 receivable each December 31. An assumed interest rate of 11% is imputed. Instructions Prepare the entries that would be recorded by Menachem Inc. for the sale and for the receipts and inter- est on the following dates. (Assume that the effective interest method is used for amortization purposes.) (a) December 31, 2007. (c) December 31, 2009. (e) December 31, 2011. (b) December 31, 2008. (d) December 31, 2010. P7-10 (Comprehensive Receivables Problem) Connecticut Inc. had the following long-term receivable account balances at December 31, 2006. Note receivable from sale of division $1,800,000 Note receivable from officer 400,000 Transactions during 2007 and other information relating to Connecticut’s long-term receivables were as follows.
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