Problem:
The trial balance before adjustment for sinatra company shows the following balances
DR - Accounts Rec. 82,000
DR - Allowance for doubtful accounts 1,750
CR - Sales 430,000
1. To obtain additional cash, Sinatra factors without recourse 20,000 of accounts receivable with Stills Finance. The finance charge is 10% of the amt. factored.
2. To obtain a one year loan of 55,000 Sinatra assigns 65,000 of specific receivable accounts to Ruddin Financial. The finance charge is 8% of the loan, the cash is received and the accounts turned over to Ruddin financia.
3. The company wants to maintain the Allowance for Doubtful accounts at 5% of gross accts receivable.
4. The company wishes to increase the allowance account by 1 1/2% of net sales.