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int account - (Bad Debt Reporting The chief accountant for...

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Unformatted text preview: (Bad Debt Reporting) The chief accountant for Emily Dickinson Corporation provides you with the following list of accounts receivable written off in the current year. Date Customer Amount March 31 E. L. Masters Company $7,800 June 30 Stephen Crane Associates 6,700 September 30 Amy Lowell's Dress Shop 7,000 December 31 R. Frost, Inc. 9,830 Emily Dickinson Corporation follows the policy of debiting Bad Debt Expense as accounts are written off. The chief accountant maintains that this procedure is appropriate for financial statement purposes because the Internal Revenue Service will not accept other methods for recognizing bad debts. All of Emily Dickinson Corporation's sales are on a 30-day credit basis. Sales for the current year total $2,200,000, and research has determined that bad debt losses approximate 2% of sales. Instructions Do you agree or disagree with Emily Dickinson Corporation policy concerning recognition of bad debt expense? Why or why not? By what amount would net income differ if bad debt expense was computed using the percentage-of-sales approach? $ 12670 E7-13 Correct. (Assigning Accounts Receivable) On April 1, 2007, Rasheed Company assigns $400,000 of its accounts receivable to the Third National Bank as collateral for a $200,000 loan due July 1, 2007. The assignment agreement calls for Rasheed Company to continue to collect the receivables. Third National Bank assesses a finance charge of 2% of the accounts receivable, and interest on the loan is 10% (a realistic rate of interest for a note of this type). (List multiple debit/credit entries in order of magnitude.) Instructions (a) Prepare the April 1, 2007, journal entry for Rasheed Company. Description Debit Credit Cash 192,000 Finance charge 8,000 Notes payable 200,000 (b) Prepare the journal entry for Rasheed's collection of $350,000 of the accounts receivable during the period from April 1, 2007, through June 30, 2007. Description Debit Credit Cash 350000 Accounts receivable 350000 (c) On July 1, 2007, Rasheed paid Third National all that was due from the loan it secured on April 1, 2007. Description Debit Credit Notes payable 200,000 Interest expense 5,000 Cash 205,000 E7-13 Correct. (Assigning Accounts Receivable) On April 1, 2007, Rasheed Company assigns $400,000 of its accounts receivable to the Third National Bank as collateral for a $200,000 loan due July 1, 2007. The assignment agreement calls for Rasheed Company to continue to collect the receivables. Third National Bank assesses a finance charge of 2% of the accounts receivable, and interest on the loan is 10% (a realistic rate of interest for a note of this type). (List multiple debit/credit entries in order of magnitude.) Instructions (a) Prepare the April 1, 2007, journal entry for Rasheed Company....
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int account - (Bad Debt Reporting The chief accountant for...

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