Pacific Communication Systems (PCS) uses the aging method for its accounts receivable. On January 1, 2020, the balance in the allowance for doubtful accounts was $2.25 million. For the year ended December 31, 2020, PCS made $945 million of credit sales and wrote off $12.5 million of accounts as uncollectible. For interim reporting purposes, the company recorded bad debts expense equal to 1% of credit sales during 2020. The aging analysis at the end of 2020 indicates the estimated uncollectible accounts total $2.5 million.

Required:

a. Record the year-end adjusting entry to record bad debts expense.

b. During 2020, PCS factored $50 million of its receivables with recourse. The factor paid PCS $47 million cash after deducting a holdback of $2 million for potential uncollectible accounts. Show the journal entry to record this transaction.

c. Six months later, the factor determined that $0.5 million are uncollectible and therefore paid PCS $1.5 million out of the $2 million holdback. In total, PCS received $48.5 million from this factoring transaction. Record the journal entries for this transaction.