USE THE FOLLOWING INFORMATION TO ANSWER THE NEXT (6) QUESTIONS:

Sparky Company occasionally uses its accounts receivable to obtain immediate cash. At the end of their second quarter, June 30, 2018, the company reported the following for their accounts receivable:

Accounts Receivable (net of $31,200 allowance) $748,800

During the period from July 1 - Sept. 30, Sparky had sales of $1,200,000, of which 85% were on account. Sparky collected $810,000 on unassigned accounts and wrote off $12,000 of unassigned accounts receivable. Sparky also collected $1,450 from a customer whose account had previously been written off (not included in the $810,000 above). (HINT: Use your CH 7 notes, page 6, to help you reconcile the A/R and ADA t-accounts using this information.)

• On August 1, Sparky assigned $350,000 of the accounts receivable to E-Z Finance and received 80% of the value of the accounts assigned less a finance fee of $5,000. E-Z charges 1% per month (12% APR) on the outstanding loan balance. Cash collections from assigned accounts are to be remitted monthly to E-Z and cover principal and accrued interest for the month.
• During August, Sparky collected $210,000 in cash of the accounts receivable assigned and, in addition, accepted sales returns of $3,000 on assigned accounts.
• During September, Sparky collected $61,000 in cash and, in addition, wrote off $2,000 of assigned accounts as uncollectible.

On September 30, Sparky estimated 4% of the total accounts receivable (e.g. Accounts Receivable-General and Accounts Receivable-Assigned) to be uncollectible.

a. Determine how much Interest Expense Sparky would report on their quarterly income statement for the period July 1 thru Sept 30 from the accounts receivable assigned.

b. Sparky records Bad Debt Expense quarterly as an AJE. Determine Bad Debt Expense for the third quarter, July 1 - Sept 30: