Lonergan Company occasionally uses its accounts receivable to obtain immediate cash. At the end of...
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Accounting
Lonergan Company occasionally uses its accounts receivable to obtain immediate cash. At the end of June the company had accounts receivable of $ Lonergan needs approximately $ to capitalize on a unique investment opportunity. On July a local bank offers Lonergan the following two alternatives:
Borrow $ sign a promissory note, 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 interest on the unpaid balance of the note at the beginning of the period.
Transfer $ of specific receivables to the bank without recourse. The bank will charge a factoring fee on the amount of receivables transferred. The bank will collect the receivables directly from customers. The sale criteria are met.
Required:
Prepare the journal entries that would be recorded on July for:
alternative a
alternative b
Assuming that of all June receivables are collected during July, prepare the necessary journal entries to record the collection and the remittance to the bank for:
alternative a
alternative b
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