Salen Company finances some of its current operations by assigning accounts receivable to a finance company. On
Question:
Salen Company finances some of its current operations by assigning accounts receivable to a finance company. On July 1, 2015, it assigned, under guarantee, specific accounts amounting to ¥150,000,000. The finance company advanced to Salen 80% of the accounts assigned (20% of the total to be withheld until the finance company has made its full recovery), less a finance charge of ½% of the total accounts assigned.
On July 31, Salen Company received a statement that the finance company had collected ¥80,000,000 of these accounts and had made an additional charge of ½% of the total accounts outstanding as of July 31.
This charge is to be deducted at the time of the first remittance due Salen Company from the finance company.
(Hint: Make entries at this time.) On August 31, 2015, Salen Company received a second statement from the finance company, together with a check for the amount due. The statement indicated that the finance company had collected an additional ¥50,000,000 and had made a further charge of ½% of the balance outstanding as of August 31.
Instructions Make all entries on the books of Salen Company that are involved in the transactions above.
Step by Step Answer:
Intermediate Accounting IFRS Edition
ISBN: 9781118443965
2nd Edition
Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield