Lincraft Corp. reports a current ratio of 3-to-1 in its 20X2 financial statements. The statement of financial position shows current assets of $3,139,000 and current liabilities of $1,062,600. Lincraft has accounts receivable of $1,297,300. The company transfers $1,000,000 of these accounts receivable to a financial institution. There are $35,100 of bad debts associated with these accounts receivable, an amount that is already in the allowance for doubtful accounts. Proceeds of $897,700 are received from the transfer. The transfer is on a non-notification basis, which means that the customers pay Lincraft and Lincraft then remit the cash to the financial institution. The customers pay $945,400 to Lincraft on schedule, $35,100 is written off to the allowance at the appropriate time, and the cash remittance is forwarded to the financial institution.

Required:

1. Record all journal entries for the sequence of events assuming: a. The transfer is recorded as a sale/derecognition. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

1. Record the $1,000,000 transfer of receivables to a financial institution. There are $35,100 of bad debts associated with these accounts receivable and proceeds of $897,700 are received from the transfer.
2. Record the $945,400 cash remittance is forwarded to the financial institution.

The transfer is recorded as a borrowing. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

1. Record the $945,400 note payable signed on the $897,700 received from the transfer.
2. Record the $945,400 cash collected from customers.
3. Record the $945,400 repayment of note payable.
4. Record the interest expense on the note.
5. Record the write off of accounts receivable.