Reference no: EM131765861

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.