Question

On November 30, Petrov Co. has $147,700 of accounts receivable and uses the perpetual inventory system.

Dec.		4		Sold $5,345 of merchandise (that had cost $3,421) to customers on credit, terms n/30.
		9		Sold $20,678 of accounts receivable to Main Bank. Main charges a 10% factoring fee.
		17		Received $2,940 cash from customers in payment on their accounts.
		27		Borrowed $11,816 cash from Main Bank, pledging $15,361 of accounts receivable as security for the loan.

(1) Prepare journal entries to record the above transactions.
(2) Which transaction would most likely require a note to the financial statements?

Answer 1

Answer
1 )
Date	Account Title	Debit	Credit
Jul-04	Accounts receivable	$ 5,345
	Sales		$ 5,345
Jul-04	Cost of goods sold	$ 3,421
	Merchandise inventory		$ 3,421
Jul-09	Cash	$18,610
	Factoring fee expense	$ 2,068		20678*10%
	Accounts receivable		$20,678
Jul-17	Cash	$ 2,940
	Accounts receivable		$ 2,940
Jul-27	Cash	$11,816
	Notes payable		$11,816
Jul-27	No journal entry required
2 )
The transaction requiring note to financial statement is:
Accounts receivable in the amount of $15,361 are pledged as security for a $11,816 note payable to Main Bank.
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