Problem - 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 $430,000
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 the Allowance for Doubtful Accounts at 5% of gross accounts receivable.
4. The company wishes to increase the allowance by 1½% of net sales.