Lonergan Company occasionally uses its accounts receivable to obtain immediate cash. At the end of June 2024, the company hadaccounts receivable of $980,000. Lonergan needs approximately $600,000 to capitalize on a unique investment opportunity. On July1, 2024, a local bank offers Lonergan the following two alternatives:a. Borrow $600,000, sign a promissory note, and assign the entire receivable balance as collateral. At the end of each month, aremittance will be made to the bank that equals the amount of receivables collected plus 8% interest on the unpaid balance ofthe note at the beginning of the period.b. Transfer $650,000 of specific receivables to the bank without recourse. The bank will charge a 2% factoring fee on the amountof 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 80% of all June 30 receivables are collected during July, prepare the necessary journal entries to record thecollection and the remittance to the bank for:a. alternative a.b. alternative b.

a In this situation we will debit the cash /ac by $600000 and credit the notes payable by…

equired: 1. Prepare the journal entries that would be recorded on July 1 for: a. alternative a. b. alternative b. 2. Assuming that 80% 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.

equired: 1. Prepare the journal entries that would be recorded on July 1 for: a. alternative a. b. alternative b. 2. Assuming that 80% 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.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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