E7-16 (LO2,3,6) Journalizing Various Receivable Transactions) The trial balance

Question

E7-16 (LO2,3,6) Journalizing Various Receivable Transactions) The trial balance before adjustment for Phil Collins Com pany shows the following balances. Dr. Cr Accounts Receivable Allowance for Doubtful Accounts Sales Revenue $82,000 2,120 $430,000 368 Chapter 7 Cash and Receivables 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, 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

Explanation / Answer

DR CR Cash 22500 Loss on Sales of Receivables 25000*10% 2500 Account Receivable 25000 Cash 50600 Interest Expense 4400 Note Payable 55000 Bad debt Expense 6220 Allowance for Doubtful Account 6220 82000*.05+2120 Bad debt Expense 4700 Allowance for Doubtful Account 4700 (5800-1100)

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