In: Accounting
Lonergan Company occasionally uses its accounts receivable to obtain immediate cash. At the end of June 2018, the company had accounts receivable of $1,060,000. Lonergan needs approximately $640,000 to capitalize on a unique investment opportunity. On July 1, 2018, a local bank offers Lonergan the following two alternatives:
Required:
1. Prepare the journal entries that would be
recorded on July 1 for:
a. alternative a.
b. alternative b.
2. Assuming that 80% of all June 30 receivables
are collected during July, prepare the necessary journal entries to
record the collection and the remittance to the bank for:
a. alternative a.
b. alternative b.
Prepare the journal entries that would be recorded on July 1 for alternative b. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
Note: Enter debits before credits.
Assuming that 80% of all June 30 receivables are collected during July, prepare the necessary journal entries to record the collection and the remittance to the bank for alternative a. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
1
Journal Entry for alternative A
Date |
Description |
debit$ |
Credit $ |
July-1-2018 |
Cash |
640,000 |
|
Notes Payable |
640,000 |
||
(being entry for recording borrowing of $ 640,00 and signing of notes payable) |
Journal Entry for alternative B
Date |
Description |
debit$ |
Credit $ |
July-1-2018 |
Cash |
676,200 |
|
Loss on transfer of receivable |
13800 |
||
Account receivable |
690,000 |
||
(being entry for recording account receivable) |
____________________________________________________________
2
Journal Entry for alternative A
Date |
Description |
debit$ |
Credit $ |
July-1-2018 |
Cash |
848,000 |
|
Account Receivable |
848,000 |
||
(being entry for recording collection of 80% on account receivable) |
Journal Entry for alternative B
Date |
Description |
debit$ |
Credit $ |
July-1-2018 |
Cash |
158,000 |
|
Account Receivable |
158,000 |
||
(being entry for recording collected by bank IN EXCESS OF account receivable) |