Ronald Distributors is a growing company whose ability to raise capital has not been growing as quickly as its expanding assets and sales. Ronald’s local banker has indicated that the company cannot increase its borrowing for the foreseeable future. Ronald’s suppliers are demanding payment for goods acquired within 30 days of the invoice date, but Ronald’s customers are slow in paying for their purchases (60–90 days).
As a result, Ronald has a cash flow problem. Ronald needs $160,000 to cover next Friday’s payroll. Its balance of outstanding accounts receivable totals $1,000,000.What might Ronald do to alleviate this cash crunch? Record the entry that Ronald would make when it raises the needed cash. (Assume a 2% service charge.)