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Journalizing various receivable transactions.

The trial balance before adjustment for sinatra company shows the following balances

DR - Accounts Rec. 82,000
DR - Allowance for doubtful accounts 1,750
CR - Sales 430,000

1. To obtain additional cash, Sinatra factors without recourse 20,000 of accounts receivable with Stills Finance. The finance charge is 10% of the amt. 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 financia.
3. The company wants to maintain the Allowance for Doubtful accounts at 5% of gross accts receivable.
4. The company wishes to increase the allowance account by 1 1/2% of net sales.

Solution Preview

Solution is provided in a separate excel file attached as follows.

1 Selling the Accounts Receivable to Factor on the terms of 10% finance charge without recourse..

2 Assigning the Accounts Receivable to the lender on the terms of 10% finance charge without recourse..

3 Journal entry for Allowance for Doubtful accounts at 5% of Accounts Receivable:

4 Journal entry for Allowance for Doubtful accounts at 1 1/2 % of Net sales.

Notes: (1) Note: Any Dscount, returns or bad debts in future (Possible adjustments) is credited to the account due from Factor and final settlenmet is made between the parties i.e. seller and purchaser.

On ...

Solution Summary

The expert examines journalizing various receivable transactions.

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