Question

Crane Company follows ASPE. It manufactures sweatshirts for sale to athletic-wear retailers. The following summary information was available for Crane for the year ended December 31, 2019: Cash $19,000 Accounts receivable 36,000 Inventory 85,000 Accounts payable 57,000 Accrued liabilities 24,000

Part 1 During 2020, Crane had the following transactions: 1. Total sales were $505,000. Of the total sales amount, $265,000 was on a credit basis. 2. On June 30, a $53,000 account receivable of a major customer was settled, with Crane accepting a $53,000, one-year, 10% note, with the interest payable at maturity. 3. Crane collected $150,000 on accounts receivable during the year. 4. At December 31, 2020, Cash had a balance of $18,000, Inventory had a balance of $75,000, Accounts Payable was $77,000, and Accrued Liabilities was $18,000. Prepare summary journal entries to record the items noted above. (Round answers to 0 decimal places, e.g. 8,971. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Part 2 Now assume that at year end 2020, Crane enters into the following transactions related to the company’s receivables: 1. Crane sells the note receivable to Prairie Bank for $53,000 cash plus accrued interest. Given the creditworthiness of Crane’s customer, the bank accepts the note without recourse and assesses a finance charge of 3.40%. Prairie Bank will collect the note directly from the customer. 2. Crane factors some accounts receivable at the end of the year. Accounts totalling $36,000 are transferred to Larkspur, Inc., with recourse. Larkspur retains 6% of the balances and assesses a finance charge of 3% on the transfer. Larkspur will collect the receivables from Logo’s customers. The fair value of the recourse obligation is $3,900. Prepare the journal entry to record the transfer of the note receivable to Prairie Bank. (Round answers to 0 decimal places, e.g. 8,971. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Account Titles and Explanation Debit Credit Prepare the journal entry to record the sale of receivables to Larkspur. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Account Titles and Explanation Debit Credit SHOW LIST OF ACCOUNTS Calculate the current ratio and the receivables turnover ratio for Crane at December 31, 2020. (Round answers to 2 decimal places, e.g. 1.25.) Current Ratio Accounts Receivable Turnover   times

Answer 1