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Chapter 7 HW Saved Help Save & Exit Submi Check my work Problem 7-7 Factoring versus assigning of accounts receivable [LO7-8) Lonergan Company occasionally uses its accounts receivable to obtain immediate cash. At the end of June 2018, the company had accounts receivable of $920,000. Lonergan needs approximately $570,000 to capitalize on a unique investment opportunity. On July 1, 2018, a local bank offers Lonergan the following two alternatives: a. Borrow $570,000, sign a note payable, 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 10% interest on the unpaid balance of the note at the beginning of the period. b. Transfer $620,000 of specific receivables to the bank without recourse. The bank will charge a 3% factoring fee on the amount of receivables transferred. The bank will collect the receivables directly from customers. The sale criteria are met Required: 1. Prepare the journal entries that would be recorded on July 1 for: a. alternative a. b. alternative b. 2. Assuming that 70% 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. View transaction list Journal entry worksheet Record the borrowing $570,000, sign a note payable, and assign the entire receivable balance as collateral Note: Enter debits before credits. Date tGeneral Journal Debit Credit July 01, 2018 Record entry Clear entry View general journal Req 1A Req 18 Req 2A Req 2B Prepare the journal entries that would be recorded on July 1 for alternative b. (If no entry is required for a transac journal entry required" in the first account field.) View transaction list Journal entry worksheet Record the transfer $620,000 of specific receivables to the bank without recourse. The bank will charge a 3% factoring fee on the amount of receivables transferred Note: Enter debits before credits. Date General Journal Debit Credit July 01, 2018 Saved Req 1A q 1A Req 1B Req 2A Req 28 Assuming that 70% of all June 30 receivables are collected during July, prepare the necessary journal e the remittance to the bank for alternative a. (If no entry is required for a transaction/event, select "No account field.) View transaction list Journal entry worksheet Record the end of each month, a remittance will be made to the bank that equals the amount of receivables collected plus 10% interest on the unpaid balance of the note at the beginning of the period. Note: Enter debits before credits. Date General Journal Debit Credit July 31, 2018 Req 1A Req 1B Req 2A Req 2B Assuming that 70% of all June 30 receivables are collected during July, prepare the necessary journal en the remittance to the bank for alternative b. (If no entry is required for a transaction/event, select "No j account field.) View transaction list Journal entry worksheet Record the collection of receivables, assuming that 70% of all June 30 receivables are collected on July 31. The bank will collect the transferred receivables directly. debits before credits. Date General Journal Debit Credit July 31, 2018 KPrev 5 of 16 Next