Exercise 7-10 Selling and pledging accounts receivable L.O. C3 On June 30, Roman Co. has $134,000 of accounts receivable. July 4 Sold $7,390 of merchandise (that had cost $4,730) to customers on credit. 9 Sold $18,760 of accounts receivable to Center Bank. Center charges a 4% factoring fee. 17 Received $4,065 cash from customers in payment on their accounts. 27 Borrowed $10,720 cash from Center Bank, pledging $13,936 of accounts receivable as security for the loan. Prepare journal entries to record the above selected July transactions. (The company uses the perpetual inventory system.)

Exercise 7-10 Selling and pledging accounts receivable L.O. C3

On June 30, Roman Co. has $134,000 of accounts receivable.

  

July	4	Sold $7,390 of merchandise (that had cost $4,730) to customers on credit.
	9	Sold $18,760 of accounts receivable to Center Bank. Center charges a 4% factoring fee.
	17	Received $4,065 cash from customers in payment on their accounts.
	27	Borrowed $10,720 cash from Center Bank, pledging $13,936 of accounts receivable as security for the loan.

  

Prepare journal entries to record the above selected July transactions. (The company uses the perpetual inventory system.)

 

Explanation:

July

9

Factoring Fee Expense = $18,760 × 0.04 = 750

  

July	27	Note to Financial Statements:
		Accounts receivable in the amount of $13,936 are pledged as security for a $10,720 note payable to Center Bank.

At year-end (December 31), Alvare Company estimates its bad debts as 0.30% of its annual credit sales of $743,000. Alvare records its Bad Debts Expense for that estimate. On the following February 1, Alvare decides that the $372 account of P. Coble is uncollectible and writes it off as a bad debt. On June 5, Coble unexpectedly pays the amount previously written off. Prepare the journal entries of Alvare to record these transactions and events of December 31, February 1, and June 5.

At year-end (December 31), Alvare Company estimates its bad debts as 0.30% of its annual credit sales of $743,000. Alvare records its Bad Debts Expense for that estimate. On the following February 1, Alvare decides that the $372 account of P. Coble is uncollectible and writes it off as a bad debt. On June 5, Coble unexpectedly pays the amount previously written off.

    

Prepare the journal entries of Alvare to record these transactions and events of December 31, February 1, and June 5.

 

Explanation:

Dec. 31

(0.003 × $743,000) = 2,229

Sami Company recorded the following selected transactions during November 2011: Date General Journal Debit Credit Nov. 5 Accounts Receivable—Surf Shop 5,363 Sales 5,363 10 Accounts Receivable—Yum Enterprises 1,918 Sales 1,918 13 Accounts Receivable—Matt Albin 1,125 Sales 1,125 21 Sales Returns and Allowances 290 Accounts Receivable—Matt Albin 290 30 Accounts Receivable—Surf Shop 3,999 Sales 3,999

Sami Company recorded the following selected transactions during November 2011:

Date	General Journal	Debit	Credit
Nov. 5	Accounts Receivable—Surf Shop	5,363
	Sales		5,363
10	Accounts Receivable—Yum Enterprises	1,918
	Sales		1,918
13	Accounts Receivable—Matt Albin	1,125
	Sales		1,125
21	Sales Returns and Allowances	290
	Accounts Receivable—Matt Albin		290
30	Accounts Receivable—Surf Shop	3,999
	Sales		3,999

1.

Prepare a general ledger having T-accounts for Accounts Receivable, Sales, and Sales Returns and Allowances. Also open an accounts receivable subsidiary ledger having a T-account for each customer. Post these entries to both the general ledger and the accounts receivable ledger.

2. Prepare a schedule of accounts receivable.