Presented below is information related to Sanford Corp. July 1 Sanford Corp. sol
ID: 2492840 • Letter: P
Question
Presented below is information related to Sanford Corp.
July 1 Sanford Corp. sold to Legler Co. merchandise having a sales price of $10,000 with terms 2/10, net/60. Sanford records its sales and receivables net.
July 5 Accounts receivable of $12,000 (gross) are factored with Rothchild Credit Corp. without recourse at a financing charge of 9%. Cash is received for the proceeds; collections are handled by the finance company. (These accounts were all past the discount period.)
July 9 Specific accounts receivable of $9,000 (gross) are pledged to Rather Credit Corp. as security for a loan of $6,000 at a finance charge of 6% of the amount of the loan. The finance company will make the collections. (All the accounts receivable are past the discount period.)
Dec. 29 Legler Co. notifies Sanford that it is bankrupt and will pay only 10% of its account. Give the entry to write off the uncollectible balance using the allowance method. (Note: First record the increase in the receivable on July 11 when the discount period passed.)
Instructions
Prepare all necessary entries in general journal form for Sanford Corp.
Explanation / Answer
Sanford Corp Journal entries Date Account Title Dr $ Cr $ Jul 1. Sales Revenue 10,000 Accounts Receivable 9,800 Sales Discount 200 ( recording net sales to Legler with 2% discount) Jul 5. Accounts Receivable 12,000 Cash 10,920 Loss on Sale of Receivables 1,080 ( recording factoring of AR & Cash receipt after deduction of finance charges) Jul 9. Loan Payable 6,000 Cash 5,640 Financing Fees 360 ( Loan taken agianst pledging of AR balance) Jul 11. Accounts Receivable 200 Sales Discount 200 ( reversal of Legler discount as payment not received within discount days) Dec 29. Accounts Receivable 9,000 Allowance for Uncollectible Accounts 9,000 ( writing off 90% of Legler receivables as uncollectible)