Week $4$: Bad Debts & Disposal of Receivables

Back on June $27,$ the company sold merchandise on account to LG Motors for $$7,250.$ On August $11,$ the company

determines that it cannot collect this amount since LG Motors has gone out of business. Prepare the journal entry using the

direct write off method.

Moving forward, the company decides to utilize the Allowance for Doubtful Accounts Method to estimate its losses from

uncollectable accounts. So on August $30,$ the company determines that approximately $$2,500$ of its remaining accounts

receivable will be uncollectable. Prepare the journal entry to record this bad debt.

On September $15$ the company finds out that $$450$ owed to them by Bliss Creations is uncollectible. Prepare the journal

entry to take this amount from the Allowance for Doubtful Accounts

Due to the issues that the company is having collecting receivables, they decide to sell some off to a finance company. On

September $20,$ they sold $$5,255$ of accounts receivable to Main Street Bank. The bank charged a $5\%$ factoring fee for this

transaction. Prepare the journal entry to record this sale.