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Bad Debt Expense, Aging of Accounts Receivable, Factoring, Journal Entry. Anche Company has orga- nized its accounts receivable by customer and how long each receivable has been outstanding. Anche records bad debt expense based on an analysis of an aged schedule. The following information is as of the end of the year (December 31):

Bad Debt Expense, Aging of Accounts Receivable, Factoring, Journal Entry. Anche Company has orga- nized its accounts receivable by customer and how long each receivable has been outstanding. Anche records bad debt expense based on an analysis of an aged schedule. The following information is as of the end of the year (December 31):

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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P9-6. Bad Debt Expense, Aging of Accounts Receivable, Factoring, Journal Entry. Anche Company has orga- nized its accounts receivable by customer and how long each receivable has been outstanding. Anche records bad debt expense based on an analysis of an aged schedule. The following information is as of the end of the year (December 31): Days Past Due Customer No. Total Due Current 1-30 Days 31-60 Days Over 60 Days 10901 $ 70,000 $ 60,000 $ 10,000 10902 60,000 50,000 10,000 10903 170,000 150,000 20,000 10904 30,000 20,000 $ 10,000 10905 50,000 20,000 10,000 $20,000 10906 110,000 90,000 20,000 Totals $490,000 $350,000 $100,000 $20,000 $20,000 % uncollectible 2% 5% 30% 95% At the beginning of the year, Anche had accounts receivable of $500,000 and a credit balance of $30,000 in its allowance for uncollectible accounts. During the year, it wrote off specific accounts receivable in the amount of $80,000. Assume no recoveries of write-offs during the year. Required » a. Compute bad debt expense for the year ending December 31 and the net realizable value of Anche's accounts receivable as of December 31. b. Prepare the journal entry to record the bad debt expense for the year. c. Independent of the information used in parts (a) and (b), assume that on January 1 of the current year with the net realizable value of accounts receivable equal to $470,000, the company decided to factor $400,000 of accounts receivable to Gustav Factors, Ltd. Gustav retains 6% of the amount factored as a reserve or hold back. Gustav Factors also charged Anche a 4% financing fee (4% of the total factored amount). As a result, only 90% of the proceeds are remitted. i. Prepare the journal entry to record the factoring of $400,000 of accounts receivable assuming that Anche sold the receivables without recourse. ii. Prepare the journal entry to record the factoring of $400,000 of accounts receivable assuming that Anche sold the receivables with recourse and the recourse obligation is estimated to be $5,000.
Transcribed Image Text:P9-6. Bad Debt Expense, Aging of Accounts Receivable, Factoring, Journal Entry. Anche Company has orga- nized its accounts receivable by customer and how long each receivable has been outstanding. Anche records bad debt expense based on an analysis of an aged schedule. The following information is as of the end of the year (December 31): Days Past Due Customer No. Total Due Current 1-30 Days 31-60 Days Over 60 Days 10901 $ 70,000 $ 60,000 $ 10,000 10902 60,000 50,000 10,000 10903 170,000 150,000 20,000 10904 30,000 20,000 $ 10,000 10905 50,000 20,000 10,000 $20,000 10906 110,000 90,000 20,000 Totals $490,000 $350,000 $100,000 $20,000 $20,000 % uncollectible 2% 5% 30% 95% At the beginning of the year, Anche had accounts receivable of $500,000 and a credit balance of $30,000 in its allowance for uncollectible accounts. During the year, it wrote off specific accounts receivable in the amount of $80,000. Assume no recoveries of write-offs during the year. Required » a. Compute bad debt expense for the year ending December 31 and the net realizable value of Anche's accounts receivable as of December 31. b. Prepare the journal entry to record the bad debt expense for the year. c. Independent of the information used in parts (a) and (b), assume that on January 1 of the current year with the net realizable value of accounts receivable equal to $470,000, the company decided to factor $400,000 of accounts receivable to Gustav Factors, Ltd. Gustav retains 6% of the amount factored as a reserve or hold back. Gustav Factors also charged Anche a 4% financing fee (4% of the total factored amount). As a result, only 90% of the proceeds are remitted. i. Prepare the journal entry to record the factoring of $400,000 of accounts receivable assuming that Anche sold the receivables without recourse. ii. Prepare the journal entry to record the factoring of $400,000 of accounts receivable assuming that Anche sold the receivables with recourse and the recourse obligation is estimated to be $5,000.
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