The trial balance before adjustment for Sunshare Ltd. shows the following balances.

Debit Credit

Net sales K4, 300, 000

Accounts receivable 1,690,000

Allowance for doubtful accounts K21, 200

Consider the following independent situations:

1. To obtain additional cash, Sunshare factors without guarantee K250, 000 of accounts receivable with FNB. The finance charge is 11% of the amount factored.

2. To obtain a 1-year loan of K375, 000, Sunshare assigns K400, 000 of specific receivable accounts to Madison Financial services. The finance charge is 9% of the loan; the cash is received and the accounts turned over to Madison.

3. The company wants to maintain Allowance for Doubtful Accounts at 6% of gross accounts receivable.

Required

a) Discuss how the accounting for the situation in (1) above will differ with that in (2)

b). Using the data above, give the journal entries required to record situations 1 3.