Concept explainers
Accounts receivable
Accounts receivable refers to the amounts to be received within a short period from customers upon the sale of goods and services on account. In other words, accounts receivable are amounts customers owe to the business. Accounts receivable is an asset of a business.
Sale of receivables to a factor:
Receivables can be liquidated by selling the receivables to a factor, such as financial institutions or bankers, by losing some percentage of receivables as fees (Service charge expense) before its maturity period. Factors will collect cash on receivables directly from the respective customers at its maturity.
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Chapter 8 Solutions
FIN. ACCT.-TOOLS FOR BUS.DEC.MAKING-CODE
- On December 1 of the current year, Jordan Inc. assigns 125,000 of its accounts receivable to McLaughlin Company for cash. McLaughlin Company charges a 750 service fee, advances 85% of Jordans accounts receivable, and charges an annual interest rate of 9% on any outstanding loan balance. Prepare the related journal entries for Jordan.arrow_forward3. On March 3, Greentree Appliances sells $480,000 of its receivables to Naomi Factors, Inc. Naomi Factors assesses a finance charge of 6% of the amount of receivables sold. Prepare the entry on Greentree Appliance's books to record the sale of the receivables. List two advantages to Greentree to using a factor. Date Account Titles and Explanation Ref Debit Credit EXTRA CREDIT: List two advantages to Greentree due to using a factor.arrow_forward(Recording Sales Transactions) Presented below is information from Perez Computers Incorporated.July 1 Sold $20,000 of computers to Robertson Company with terms 3/15, n/60. Perez uses the gross method to record cash discounts. Perez estimates allowances of $1,300 will be honored on these sales.July 10 Perez received payment from Robertson for the full amount owed from the July transactions.July 17 Sold $200,000 in computers and peripherals to The Clark Store with terms of 2/10, n/30.July 30 The Clark Store paid Perez for its purchase of July 17.InstructionsPrepare the necessary journal entries for Perez Computers.arrow_forward
- Presented below is information from Metlock Computers Incorporated. July 1 10 Sold $19,600 of computers to Robertson Company with terms 3/15, n/60. Metlock uses the gross method to record cash discounts. Metlock estimates allowances of $1,274 will be honored on these sales. (Metlock records these estimates at point of sale.) Metlock received payment from Robertson for the full amount owed from the July transactions. 17 Sold $196,000 in computers and peripherals to The Clark Store with terms of 2/10, n/30. 30 The Clark Store paid Metlock for its purchase of July 17. Prepare the necessary journal entries for Metlock Computers. (If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually. List all debit entries before credit entries. Record journal entries in the order presented in the problem.) Date July 1 Account Titles and Explanation Accounts…arrow_forwardPresented below is information from Kingbird Computers Incorporated. July 1 Sold $24,000 of computers to Robertson Company with terms 3/15, n/60. Kingbird uses the gross method to record cash discounts. Kingbird estimates allowances of $1,560 will be honored on these sales. (Kingbird records these estimates at point of sale.) Kingbird received payment from Robertson for the full amount owed from the July transactions. Sold $240,000 in computers and peripherals to The Clark Store with terms of 2/10, n/30. The Clark Store paid Kingbird for its purchase of July 17. 10 17 30 Prepare the necessary journal entries for Kingbird Computers. (If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually. List all debit entries before credit entries. Record journal entries in the order presented in the problem.) Date Account Titles and Explanation (To record sales…arrow_forwardOn March 19 Gunderson’s Hardware received a $20,800 invoice dated March 15. Cash discount terms were 3/10, n/30. On March 24, Gunderson sent an $8,320 partial payment. What is the outstanding amount due on this invoice? What is the outstanding on this invoice?arrow_forward
- Elkhorn Company purchased merchandise on account from Springhill Company for $42,000, terms 2/10, n/30. Elkhorn returned merchandise with an invoice amount of $8,000 and received full credit. If Elkhorn Company pays the invoice within the discount period, what is the amount of cash required for the payment? What account is debited by Elkhorn Company to record the return?arrow_forwardOn March 3, Vaughn Manufacturing sells $723,600 of its receivables to Western Factors Inc. Western Factors Inc. assesses a service charge of 4% of the amount of receivables sold.Prepare the entry on Vaughn Manufacturing’ books to record the sale of the receivables. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit Mar. 3 enter an account title for the journal entry on March 3 enter a debit amount enter a credit amount enter an account title for the journal entry on March 3 enter a debit amount enter a credit amount enter an account title for the journal entry on March 3 enter a debit amount enter a credit amountarrow_forwardPrudential Company sold 30 air conditioning units, on January 15, 2020; sale price for each unit is P40,000.All of the sales are subject to terms 2/10, n30; the entity used the net method of accounting for accounts receivable.Required;1. prepare journal entry to record the sale.2. prepare the journal entry to record receipt of the payment assuming the correct amount was received on January 25, 2020.3. prepare the journal entry to record receipt of the payment, assuming the correct amount was received on February 10, 2020.arrow_forward
- E8-7 On March 3, Plume Appliances sells $710,000 of its receivables to Western Factors Inc. Western Factors Inc. assesses a service charge of 4% of the amount of receivables sold. Pr re Instructions Prepare the entry on Plume Appliances' books to record the sale of the receivables. d thearrow_forwardShowcase Co., a furniture wholesaler, sells merchandise to Balboa Co. on account, $55,000, terms n/30. The cost of the goods sold is $33,000. Showcase issues a credit memo for $11,000 for merchandise returned prior to Balboa paying the original invoice. The cost of the merchandise returned is $6,600. c. Journalize Showcase Co.'s entry for the receipt of the check for the amount due from Balboa Co.arrow_forwardScarlet Company received an invoice for $67,000.00 that had payment terms of 2/5 n/30. If it made a partial payment of $16,500.00 during the discount period, calculate the balance of the invoice. Round to the nearest centarrow_forward
- Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage Learning
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