Chapter 9, Problem 9.6P

Bad Debt Expense, Aging of Accounts Receivable, Factoring, Journal Entry. Anche Company has organized 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

1. 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
2. b. Prepare the journal entry to record the bad debt expense for the year.
3. 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.
   1. i. Prepare the journal entry to record the factoring of $400,000 of accounts receivable assuming that Anche sold the receivables without recourse.
   2. 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.