Exercise 7-16

The trial balance before adjustment for Metlock Company shows the following balances.

		Dr.		Cr.
Accounts Receivable		$85,600
Allowance for Doubtful Accounts		2,970
Sales Revenue				$472,600

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, Metlock factors without recourse $23,900 of accounts receivable with Stills Finance. The finance charge is 12% of the amount factored.
2.		To obtain a 1-year loan of $58,700, Metlock assigns $71,300 of specific receivable accounts to Crosby Financial. The finance charge is 9% of the loan; the cash is received and the accounts turned over to Crosby Financial.
3.		The company wants to maintain the Allowance for Doubtful Accounts at 5% of gross accounts receivable.
4.		Based on an aging analysis, an allowance of $6,357 should be reported. Assume the allowance has a credit balance of $1,195.