Reference no: EM133087850

Question - Information on Ayayai Corp., which reports under ASPE, follows:

July 1 Ayayai Corp. sold to Blossom Company merchandise having a sales price of $8,000, terms 2/10, n/60. Ignore cost of goods sold entry.

July 3 Blossom Company returned defective merchandise having a sales price of $500. The merchandise was not saleable and was scrapped.

July 5 Accounts receivable of $18,000 are factored with Bramble Corp. without recourse at a financing charge of 8%. Cash is received for the proceeds and collections are handled by the finance company.

July 9 Specific accounts receivable of $14,000 (gross) are pledged to Landon Credit Corp. as security for a loan of $10,000 at a finance charge of 2% of the loan amount plus 8% interest on the outstanding balance. Ayayai will continue to make the collections. All the accounts receivable pledged are past the discount period and were originally subject to a 2% discount.

Dec. 29 Blossom Company notifies Ayayai that it is bankrupt and will be able to pay only 10% of its account. Give the entry to write off the uncollectible balance using the allowance method.

Required - Prepare all necessary journal entries on Ayayai Corp.'s books.