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21.02.2020 •
Business
Lonergan Company occasionally uses its accounts receivable to obtain immediate cash. At the end of June 2021, the company had accounts receivable of $960,000. Lonergan needs approximately $590,000 to capitalize on a unique investment opportunity. On July 1, 2021, a local bank offers Lonergan the following two alternatives:
(a) Borrow $590,000, sign a note payable, and assign the entire receivable balance as collateral. At the end of each month, a remittance will be made to the bank that equals the amount of receivables collected plus 12% interest on the unpaid balance of the note at the beginning of the period.
(b) Transfer $640,000 of specific receivables to the bank without recourse. The bank will charge a 4% factoring fee on the amount of receivables transferred. The bank will collect the receivables directly from customers. The sale criteria are met.
Required: 1. Prepare the journal entries that would be recorded on July 1 for alternative
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Ответ:
Explanation:
Alternative 1:
Dr CASH 590,000
Cr Notes Payable 590,000
Dr Interest expense 5900 [590,000*12%/12]
Dr Notes payable 590,000
Cr CASH 595,900
Alternative 2:
Dr CASH 614,400
Dr Loss on transfer of receivables 25,600
Cr Accounts receivables 640,000
[4%*640,000]
Ответ: