The unadjusted trial balance of Rain Corporation on December 31, 2023 included the following: Debit Credit Accounts receivable $80,000 Allowance for doubtful accounts $2,000 Sales revenue $5,800,000 Sales returns and allowances $34,000 On January 1, 2024, Rain sold $35,000 of its accounts receivable to Cloud Incorporated on a with recourse basis. Cloud assessed a 4% finance charge of the balance of accounts receivable and retained an amount equal to 5% of accounts receivable for possible adjustments. Required 1. Prepare the fiscal 2023 year-end adjusting journal entry assuming that the estimate of uncollectible accounts is determined by taking 6% of gross accounts receivable. You must provide a detailed calculation of the amount. Journal entry description is not required. 2. Prepare the journal entries for Rain AND Cloud to record the sale of the accounts receivable to Cloud, assuming that the recourse liability had a fair value of $5,000. You must provide detailed calculations of amounts. Journal entry description is not required.
The unadjusted
Debit Credit
Allowance for doubtful accounts $2,000
Sales revenue $5,800,000
Sales returns and allowances $34,000
On January 1, 2024, Rain sold $35,000 of its accounts receivable to Cloud Incorporated on a with recourse basis. Cloud assessed a 4% finance charge of the balance of accounts receivable and retained an amount equal to 5% of accounts receivable for possible adjustments.
Required
1. Prepare the fiscal 2023 year-end
2. Prepare the journal entries for Rain AND Cloud to record the sale of the accounts receivable to Cloud, assuming that the recourse liability had a fair value of $5,000. You must provide detailed calculations of amounts. Journal entry description is not required.
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