Problem 4
Journalize the following in the books of Don:
(1) Bob informs Don that Ray's acceptance for Rs. 3,000 has been dishonoured and noting
charges are Rs.40. Bob accepts Rs.1,000 cash and the balance as bill at three months at
interest of 10%.Don accepts from Ray his acceptance at two months plus interest @ 12%
p.a.
(ii) James owes Don Rs 3,200; he sends Don's own acceptance in favour of Ralph for Rs.
3.160; in full settlement.
(iii) Don meets his acceptance in favour of Singh for Rs. 4,500 by endorsing John's
acceptance for Rs. 4,450 in full settlement.
(iv) Ray's acceptance in favour of Don retired one month before due date, interest is taken a
the rate of 6% p.a.
Answers
Answer:
Explanation:
1. (a) Ray Dr. 3,040
To Bob 3,040
(Ray’s acceptance endorsed to Bob dishonoured on due date
nothing charges paid by Bob ₹40)
(b) Bob Dr. 3,040
Interest A/c (10% of ₹2,040 × 3/12) Dr. 51
To Cash A/c 1,000
To Bills Payable A/c 2,091
(Amount payable to Bob ₹3,040 settled by cash payment
₹1,000 and issue of new bill for ₹2,091 including interest ₹51
for three months on ₹2,040 @ 10% p.a.)
(c) Bills Receivable A/c Dr. 3,100.80
To Ray 3,040.00
To Interest A/c (12% of ₹3,040 × 2/12) 60.80
(Bill received from Ray for ₹3,040 due against earlier
acceptance dishonoured plus ₹60.80 interest for two months
@ 12% p.a.)
2. Bills Payable A/c Dr. 3,160
Discount A/c Dr. 40
To James 3,200
(Cancellation of bills payable to Ralph for ₹3,160 in settlement
of ₹3,200 due from James)
3. Bills Payable A/c Dr. 4,500
To Bills Receivable A/c 4,450
To Discount A/c 50
(Settlement of acceptance issued to Mr. Singh by endorsement
of John’s Acceptance for ₹4,450)
4. Bank A/c Dr. 3,085.30
Discount A/c Dr. 15.50
To Bills Receivable A/c 3,100.80
(Amount received from Ray in settlement of Bills Payable,
retired one month before due date)
Explanation:
Don = drawer
Bob = endorse
Ray = acceptor
