Question

The trial balance before adjustment for Phil Collins Company shows the following balances.
Dr. Cr.

Accounts Receivable $82,000

Allowance for Doubtful Accounts 2,120 Sales Revenue $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, Collins factors without recourse $25,000 of accounts receivable with Stills Finance. The finance charge is 10% of the amount factored.

2. To obtain a 1-year loan of $55,000, Collins pledges $65,000 of specific receivable accounts to Crosby Financial. The finance charge is 8% of the loan; the cash is received and the accounts turned over to Crosby Financial.

3. The company wants to maintain the Allowance for Doubtful Accounts at 5% of gross accounts receivable.

4. Based on an aging analysis, an allowance of $5,800 should be reported. Assume the allowance has a credit balance of $1,100.

Please type the answer

Answer 1

1	Cash	22500
	Loss on Sale of Receivables	2500		=25000*10%
	Accounts Receivable		25000
2	Cash	50600
	Interest Expense	4400		=55000*8%
	Notes Payable		55000
3	Bad debt expense	6220		=(82000*5%)+2120
	Allowance for Doubtful Accounts		6220
4	Bad debt expense	4700		=5800-1100
	Allowance for Doubtful Accounts		4700