(Journalizing Various Receivable Transactions) The trial balance before adjustment for Sinatra Company shows the following balances.
|
Dr. |
Cr. |
|
|
Accounts Receivable |
$82,000 |
|
|
Allowance for Doubtful Accounts |
1,750 |
|
|
Sales Revenue |
$430,000 |
Instructions
Using the data above, give the journal entries required to record each of the following cases. (Each situation is independent.)
1. To obtain additional cash, Sinatra factors without recourse $20,000 of accounts receivable with Stills Finance. The finance charge is 10% of the amount factored.
2. To obtain a one year loan of $55,000, Sinatra assigns $65,000 of specific receivable accounts to Ruddin Financial. The finance charge is 8% of the loan; the cash is received and the accounts turned over to Ruddin Financial.
3. The company wants to maintain Allowance for Doubtful Accounts at 5% of gross accounts receivable.
4. The company wishes to increase the allowance account by 1½% of net sales.