Question

Exercise 7-12 Presented below is information related to Vaughn Corp., which sells merchandise with terms 2/10, net 60. Vaughn Corp. records its sales and receivables net. July 1 Vaughn Corp. sold to Warren Harding Co. merchandise having a sales price of $16,000. 5 Accounts receivable of $14,800 (gross) are factored with Andrew Jackson Credit Corp. without recourse at a financing charge of 9%. Cash is received for the proceeds; collections are handled by the finance company. (These accounts were all past the discount period.) 9 Specific accounts receivable of $14,800 (gross) are pledged to Alf Landon Credit Corp. as security for a loan of $6,400 at a finance charge of 7% of the amount of the loan. The finance company will make the collections. (All the accounts receivable are past the discount period.) Dec. 29 Warren Harding Co. notifies Vaughn that it is bankrupt and will pay only 20% of its account. Give the entry to write off the uncollectible balance using the allowance method. (Note: First record the increase in the receivable on July 11 when discount period passed.) Prepare all necessary entries in general journal form for Vaughn Corp. (If no entry is required, select "No Entry" for the account titles and enter o for the amounts. Credit account tities are automatically indented when the amount is entered. Do not indent manually. Record journal entries in the order presented in the problem.) Account Titles and Explanation Date Debit Credit Cash 7/1 16000 Sales Revenue 16000 7/5 Accounts Receivable Accounts Payable Discount on Notes Receiva Accounts Receivable

Answer 1

Journal Entry - Vaghun Corp.
Date	Accounts Title	Debit	Credit
1-Jul	Accounts Receivable-Warren Harding Co	$15,680
	Sales (16000*98%)		$15,680
	TO Record Sales
5-Jul	Cash (14800*(1-.09))	$13,468
	Loss On Sale Of Receivable (Bal)	$1,332
	Accounts Receivable (14800*98%)		$14,504
	Sales Discount Forfeited (14800*2%)		$296
9-Jul	Accounts Receivable	$296
	Sales Discount Forfeited (14800*2%)		$296
9-Jul	Cash	$6,486
	Interest Expenses (6400*6%)	$384
	Notes Payable		$6,400
11-Jul	Accounts Receivable-Warren Harding Co	$320
	Sales Discount Forfeited (16000*2%)		$320
29-Dec	Allowance For Doubtful Debts (16000*80%)	$12,800
	Accounts Receivable-Warren Harding Co		$12,800