1 (Recording Bad Debts) Rodriguez Company reports the following financial information before adjustments.

Debits Credits

Accounts Receivable $25,000

Allowance for Doubtful Accounts $ 500

Sales (all on credit) $225,000

Sales Returns and Allowances $12,500

Instructions Prepare the journal entry to record Bad Debt Expense assuming Rodriguez Company estimates bad debts at

(a) 3% of net sales and (b) 8% of accounts receivable.

2 (Journalizing Various Receivable Transactions) The trial balance before adjustment for Kelly Company shows the following balances.

Dr Cr

Accounts Receivable $122,000

Allowance for Doubtful Accounts $2,000

Sales $810,000

Instructions Using the data above, give the journal entries required to record each of the following cases. (Each situation is independent.)

1. To obtain additional cash, Kelly factors without recourse $50,000 of accounts receivable with Easy Finance. The finance charge is 8% of the amount factored.

2. To obtain a one-year loan of $20,000, Kelly assigns $40,000 of specific receivable accounts to B&C Financial. The finance charge is 6% of the loan; the cash is received and the accounts turned over to B&C Financial.

3. The company wants to maintain the Allowance for Doubtful Accounts at 4% of gross accounts receivable.

4. The company wishes to increase the allowance account by 2% of net sales.