Question

The trial balance before adjustment for Sheridan Company shows the following balances.

			Dr.		Cr.
Accounts receivable			$88,000
Allowance for doubtful accounts			2,300
Sales revenue					$489,400

The following cases are independent:

1.		To obtain cash, Sheridan factors without recourse $19,900 of receivables with Anila Finance. The finance charge is 11% of the amount factored.
2.		To obtain a one-year loan of $56,000, Sheridan assigns $67,100 of specific accounts receivable to Ruddin Financial. The finance charge is 8% of the loan; the cash is received.
3.		The company wants to maintain the Allowance for Doubtful Accounts at 4% of gross accounts receivable.
4.		The company wishes to increase the allowance account by 1.50% of sales. PASS JOURNAL ENTRIES FOR THE FOLLOWING.

Answer 1

Sr No	Account Titles and Explanation	Debit ($)	Credit ($)
1	Cash	17,711
	Loss on Sale of Receivables (19,900*11%)	2,189
	Accounts Receivable		19,900
	(To record factoring of receivables)
2	Cash	51,520
	Interest Expense (56,000*8%)	4,480
	Notes Payable		56,000
	(To record loan received)
3	Bad Debts Expense ((88,000*4%)+2,300)	5,820
	Allowance for Doubtful Accounts		5,820
	(To record allowance for doubtful accounts)
4	Bad Debts Expense (489,400*1.50%)	7,341
	Allowance for Doubtful Accounts		7,341
	(To record allowance for doubtful accounts)