**Accounts Receivable Management: An Educational Case Study***Overview:*Lonergan Company occasionally uses its accounts receivable to obtain immediate cash. At the end of June 2021, the company had accounts receivable of $840,000. Lonergan needs approximately $560,000 to capitalize on a unique investment opportunity. On July 1, 2021, a local bank offers Lonergan the following two alternatives:a. **Borrow $560,000**: Sign a note payable and assign the entire receivable balance as collateral. Monthly remittances will be made to the bank that equals the amount of receivables collected, plus 9% interest on the unpaid balance of the note at the beginning of the period.b. **Transfer $580,000**: Transfer specific receivables to the bank without recourse. The bank will charge a 4% 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 Journal Entries (July 1) for:** - Alternative a. - Alternative b.2. **Assuming 80% Collection in July:** Prepare the necessary journal entries for the collection and remittance to the bank for: - Alternative a. - Alternative b.*Steps to Complete:*- Click on the specific requirement tab to enter your answers (e.g., Req 1A, Req 2A).- Instruction for journal entries assuming 80% collection of June 30 receivables during July.- Choose "No journal entry required" if applicable.*Note:* For precise understanding, consider the factoring fee on transfer and the interest on the borrowed amount, which will influence the financial decisions. - **Transaction List**: A link or button is provided to view detailed transactions.*Navigation:*- Tabs for different requirements and navigation controls to move between pages.This exercise aids in understanding the financial implications and decision-making processes regarding accounts receivable and cash management.

Answered: Image /qna-images/answer/210735cc-f879-41ac-9dad-40277af46b51.jpg

Lonergan Company occasionally uses ts accounts recelvable to obtaln immediate cosh. AAt the end ofJune 2021, the company hiad accounts recelvable or $840,000. Lonergan needs approximately $560,000 to capitaltze on a unique Invectmont oppornty on July 1, 2021, a local bank offers Lonergan the following two alternotives a. Borrow $560,000, Sign.a.note payable, ond assign the entire receivoble balance as collateral. At thie ond ot dach thonth, a remittance will be made to the bank that equols thhe amount of recervables collectod plus 9% Interest on the unpald balance of the note at the beginning of the pertod. b. Transfer $580,000 ofspectfic recelvables to the bank without recourse. The bank will charge a 4% factoring fee on the amountior recelvables transferred. The bank wiIl collect therecelvables directiy from customers. The sale criteria are met ped Required: 1. Prepare the Joumal entries that would be recorded on July 1 for a. alternative a. b. alternative b. 2. Assuming that 80% of all June 30 recervables are collected during July, prepare the neceacary Joumal entries to record the collection and the remittance to the bank for: a. alternative a. b. alternative b.

Lonergan Company occasionally uses ts accounts recelvable to obtaln immediate cosh. AAt the end ofJune 2021, the company hiad accounts recelvable or $840,000. Lonergan needs approximately $560,000 to capitaltze on a unique Invectmont oppornty on July 1, 2021, a local bank offers Lonergan the following two alternotives a. Borrow $560,000, Sign.a.note payable, ond assign the entire receivoble balance as collateral. At thie ond ot dach thonth, a remittance will be made to the bank that equols thhe amount of recervables collectod plus 9% Interest on the unpald balance of the note at the beginning of the pertod. b. Transfer $580,000 ofspectfic recelvables to the bank without recourse. The bank will charge a 4% factoring fee on the amountior recelvables transferred. The bank wiIl collect therecelvables directiy from customers. The sale criteria are met ped Required: 1. Prepare the Joumal entries that would be recorded on July 1 for a. alternative a. b. alternative b. 2. Assuming that 80% of all June 30 recervables are collected during July, prepare the neceacary Joumal 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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