The Following Series of Transactions Occurred During Year 1 and Year

question 113

Essay

The following series of transactions occurred during Year 1 and Year 2, when Foxworth
Co. sold merchandise to Kevin Lewis. Foxworth's annual accounting period ends on December 31.
10/01/Yr 1 Sold $12,000 of merchandise to K. Lewis, terms 2/10, n/30.
11/15/Yr 1 Lewis reports that he cannot pay the account until early next year. He agrees to exchange the account for a 120-day, 12% note receivable.
12/31/Yr 1 Prepared the adjusting journal entry to record accrued interest on the note.
03/15/Yr 2 Foxworth receives a check from Lewis for the maturity value (with interest) of the note. 03/22/Yr 2 Foxworth receives notification that Lewis' check is being returned for nonsufficient funds (NSF).
12/31/Yr 2 Foxworth writes off Lewis' account as uncollectible.
Prepare Foxworth Co.'s journal entries to record the above transactions. The company uses the
allowance method to account for its bad debt expense.

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Definitions:

Pharynx

The muscular tube that connects the mouth and nasal passages with the esophagus.

Tidal Volume

The amount of air that is inhaled or exhaled in a normal breath under resting conditions, important in respiratory physiology.

Inspiratory Capacity

The maximum amount of air that can be inhaled after a normal exhalation, used in assessing lung function.

Inspiratory Reserve Volume

The extra volume of air that can be breathed in beyond a regular breath, adding to the overall lung capacity.