The trial balance before adjustment for Pharoah Company shows the following balances. Dr. Cr. Accounts Receivable $83,500 Allowance for Doubtful Accounts 1,940 Sales Revenue $455,100 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, Pharoah factors without recourse $26,800 of accounts receivable with Stills Finance. The finance charge is 11% of the amount factored. 2. To obtain a 1-year loan of $61,600, Pharoah pledges $69,800 of specific receivable accounts to Crosby Financial. The finance charge is 9% 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 $5,452 should be reported. Assume the allowance has a credit balance of $1,163. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.)
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At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
The
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Dr.
|
Cr.
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| $83,500 | ||||
| Allowance for Doubtful Accounts | 1,940 | |||
| Sales Revenue | $455,100 |
Using the data above, give the
| 1. | To obtain additional cash, Pharoah factors without recourse $26,800 of accounts receivable with Stills Finance. The finance charge is 11% of the amount factored. | |
| 2. | To obtain a 1-year loan of $61,600, Pharoah pledges $69,800 of specific receivable accounts to Crosby Financial. The finance charge is 9% 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 $5,452 should be reported. Assume the allowance has a credit balance of $1,163. |
(If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.)
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