Problem $2$: Accounts Receivable

A$.$ Factoring

Tucker Company has accounts receivable of $$200,000.$ Tucker factors the accounts to Second

Bank without recourse. The Bank will charge a $4\%$ factoring finance fee and retains an amount

equal to $5\%$ of the accounts receivable $($for probable adjustments for sales discounts and sales

returns$).$ What entry will Tucker make to account for the originating factoring transaction?

B$.$ Assignment

Laser Company has accounts receivable of $$200,000$ and an allowance of bad debts of $$5,000.$

Laser enters into an assignment transaction with the Third Bank. The bank will lend $$150,000$ at

$12\%($on uncollected accounts receivable$)$ and will charge an initial fee based on $3\%$ of the

accounts assigned. The entire accounts receivable balance is pledged as collateral. Customer

payment is made directly to the bank.

In the following month, accounts receivable decreased by $$80,000$;$$2,300$ was due to sales

returns and the remainder was cash collected. Laser Company accrued interest as well.

Record the initial assignment transaction.

Record transactions Laser would make for the following month.

C$.$ Bad debts

Here is the information about the allowance for bad debts account for $2023$:

At yearend the auditor did an aging schedule that required an allowance of $$25,000.$

Compute the ending balance for the allowance for bad debts and bad debt expense for $2023.$

Clearly label your answer by circling the ending balance in both these accounts.