Geogia State University Intermediate Accounting TRADITIONAL HOMEWORK ITEMS – Spring 2024 – ACT 3391

TRADITIONAL HOMEWORK ITEMS – Spring 2024 – ACT 3391
General Instructions for the Traditional Homework – refer to the instructions for traditional item no.
3.
21. (4 points) On 12-31-18, J sold some inventory to T. J accepted from T a $2,000,000, 10% note
receivable. J will collect interest on the note every 12-31 starting 12-31-19. J will collect the note principle in
full on 12-31-20. Under normal circumstances, J earns 12% on its funds. The cost of the inventory sold was
$350,000. Prepare the entries J should make on 12-31-18, 12-31-19, and 12-31-20.
22. (5 points) On 12-31-21, J sold inventory to T. J accepted from T a $4,000,000, 5% note receivable. J will
collect interest on the note every 12-31 starting 12-31-22. J will collect the note principle as follows:
$2,000,000 on 12-31-22 and $2,000,000 on 12-31-23. Under normal circumstances, J earns 6% on its funds.
The cost of the inventory sold was $500,000. Prepare the entries J should make on 12-31-21, 12-31-22, and
12-31-23.
23. (5 points) Lucy factored $3,000,000 of accounts receivable with Ethel on a with recourse basis on May 1.
(Assume the transaction meets the criteria to be classified as a sale.) Ethel assessed Lucy with a finance
charge of $45,000. Ethel retained $115,000 to cover potential sales returns. Lucy estimated her recourse
liability to be $90,000. On June 30, Lucy and Ethel “settled up” meaning Lucy and Ethel paid each other any
cash that was due to the other.
Prepare the entry Lucy should make on May 1.
Based on the above facts, what net profit did Ethel end up earning?
Based on the above facts, what net expense did Lucy end up incurring?
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