Reference no: EM132503644

Questions -

Q1. Sun Inc. factors $3,000,000 of its accounts receivables with recourse for a finance charge of 3%. The finance company retains an amount equal to 10% of the accounts receivable for possible adjustments. Sun estimates the fair value of the recourse liability at $150,000.

What would be recorded as a gain (loss) on the transfer of receivables for Sun Inc.?

Q2. McGlone Corporation had a 1/1/12 balance in the Allowance for Doubtful Accounts of $25,000. During 2012, it wrote off $18,000 of accounts and collected $5,250 on accounts previously written off. The balance in Accounts Receivable was $500,000 at 1/1 and $600,000 at 12/31. At 12/31/12, McGlone estimates that 6% of accounts receivable will prove to be uncollectible.

What should McGlone report as its Allowance for Doubtful Accounts at 12/31/12?

What much should be recorded as bad expense by McGlone.

Q3. Nenn Co.'s allowance for uncollectible accounts was $190,000 at the end of 2012 and $180,000 at the end of 2011. For the year ended December 31, 2012, Nenn reported bad debt expense of $26,000 in its income statement.

What amount did Nenn debit to the appropriate account in 2012 to write off actual bad debts?