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stiks02 [169]
2 years ago
12

Lonergan Company occasionally uses its accounts receivable to obtain immediate cash. At the end of June 2021, the company had ac

counts receivable of $920,000. Lonergan needs approximately $570,000 to capitalize on a unique investment opportunity. On July 1, 2021, 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.
Business
1 answer:
n200080 [17]2 years ago
7 0

Answer:

1.

ALTERNATIVE A

01-Jul

Dr Cash $570,000

Cr Notes Payable $570,000

ALTERNATIVE B

01-Jul

Dr Cash 601,400

Dr Loss on sale of receivables $18,600

Cr Accounts Receivables $620,000

2.

ALTERNATIVE A

Dr Cash $644,000

Cr Notes Payable $644,000

Dr Interest Expense $4,750

Dr Notes Payable 570,000

Cr Cash 574,750

ALTERNATIVE B

Dr Cash $210,000

Cr Accounts Receivable $210,000

Explanation:

1. Preparation of the journal entries that would be recorded on July 1 for alternative a and

alternative b.

ALTERNATIVE A

01-Jul

Dr Cash $570,000

Cr Notes Payable $570,000

(Notes payable collected)

ALTERNATIVE B

01-Jul

Dr Cash 601,400

($620,000-$18,600)

Dr Loss on sale of receivables $18,600 (3%*$620,000)

Cr Accounts Receivables $620,000

(Remittance to bank)

2. Preparation of the necessary journal entries to record the collection and the remittance to the bank for alternative a and

alternative b.

ALTERNATIVE A

Dr Cash (920,000 x 70%) $644,000

Cr Notes Payable $644,000

Dr nterest Expense($570,000 x 10%x 1/12) $4,750

Dr Notes Payable 570,000

Cr Cash 574,750

($570,000+$4,750)

ALTERNATIVE B

Dr Cash [ (920,000 -620,000)x 70%] $210,000

Cr Accounts Receivable $210,000

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Answer:

Correct answer is A.

<u>$231,000</u>

Explanation:

Particulars                              Calculations                           Costs($)

Sales Commissions              700,000 x 5%                           35,000

Salary expenses                                                                     96,000

Advertising expenses                                                             80,000

Shipping expenses               700,000 x 2%                           14,000

Miscellaneous selling expenses 2,500 + 1/2(700,000 x 1%)    6,000

Total Sales expenses for the month of February=                     231,000

6 0
2 years ago
Mardelay Industries has discovered a defect in one of its products that may result in injury to users. The company believes it m
polet [3.4K]

Answer:

C. Reverse Logistics

Explanation:

First, a list of the options:

a. inbound logistics.

b. materials handling.

c. reverse logistics.

d. third-party logistics.

Reverse Logistics refers to any logistics undertaken by an organisation or industry that reverses or changes the normal direction of product delivery. Usually product delivery moves from the manufacturer to the distributor and then to final consumer. However, reverse logistics involves the backward movement of goods from destination back to manufacturer for different reasons.

Some of the reasons that call for reverse logistics is as given in the question, the need to develop and implement a recall program.

A Recall program is executed or embarked upon by a manufacturer either when there are widespread complaints about the product such as was the case with the exploding Samsung Note 7 from Samsung or the manufacturer discovered a defect in an already distributed product.

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3 0
2 years ago
Read 2 more answers
A Rancher is mixing two types of food, Brand X and Brand Y for his cattle. If each serving is required to have 60 grams of prote
irakobra [83]

Answer:

\left \{ {{15Q_a + 20Q_b = 60} \atop {10Q_a + 5Q_b = 30}} \right.

Brand A Q 2.4

Brand B Q 1.2

Explanation:

Using Excel solver:

contrains:

c4 = 60

d4 = 30

solve e4 for min

variable cell b2:b3

a              b        c          d         e

              Q Protein Fat Cost

Brand A 2.4 36         24 1.92

Brand B 1.2 24           6 0.6

                       60         30 2.52

Protein = 60

Fat = 30

8 0
2 years ago
9. Assume your cost is 55% of your revenue of a certain product/services, what is your profit
mars1129 [50]
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Use the cost information below for Sundar Company to determine the cost of goods manufactured during the current year:
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Explanation:

Cost of goods manufactured = Direct materials + Direct labor + Manufacturing Overhead

But

Manufacturing Overhead= Cost added during accounting period + beginning work-in-process - ending work-in-process

= $51,100 + $11,500 - $12,100

=$50,500

Cost of goods manufactured = Direct materials + Direct labor + Manufacturing Overhead

=$19,800 + $25,300 + $50,500

=$95,600

or Using the formulae

Costs Added = Direct Materials Used + Direct Labor + Factory Overhead

=$19,800 + $25,300 + $51,500 = $96,200

Cost of Goods Manufactured = Costs Added + Beginning Work in Process − Ending Work in Process Cost of Goods Manufactured

$96,200+ $11,500 - $12,100=$95,600

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2 years ago
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