Question

On November 30, Petrov Co. has $137,000 of accounts receivable and uses the perpetual inventory system. Dec. 4 Sold $5,620 of merchandise (that had cost $3,597) to customers on credit, terms n/30. 9 Sold $19,180 of accounts receivable to Main Bank. Main charges a 8% factoring fee. 17 Received $3,091 cash from customers in payment on their accounts. 27 Borrowed $10,960 cash from Main Bank, pledging $14,248 of accounts receivable as security for the loan. (1) Prepare journal entries to record the above transactions. (2) Which transaction would most likely require a note to the financial statements?

Answer 1

Solution:

Date           General Journal                             Debit        Credit

July 04     Accounts receivable                       5,620

                          Sales                                                        5,620

July 04       Cost of goods sold                       3,597

              Merchandise inventory                                       3,597

July 09            Cash                                       19,200

               Factoring fee expense                    800

                  Accounts receivable                                     20,000

July 17              Cash                                     $3,091

               Accounts receivable                                         $3,091

July 27            Cash                                     10,960

               Notes payable                                                 10,960

July 27        No journal entry required