On November 30, Petrov Co. has $128,700 of accounts receivable and uses the perpetual inventory system. (1) Prepare journal entries to record the following transactions. (2) Which transaction would most likely require a note to the financial statements? Dec. 4 Sold $7,245 of merchandise (that had cost $5,000) to customers on credit, terms n/30. 9 Sold $20,000 of accounts receivable to Main Bank. Main charges a 4% factoring fee. 17 Received $5,859 cash from customers in payment on their accounts. 27 Borrowed $10,000 cash from Main Bank, pledging $12,500 of accounts receivable as security for the loan.
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At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
On November 30, Petrov Co. has $128,700 of
(1) Prepare
likely require a note to the financial statements?
Dec. 4 Sold $7,245 of merchandise (that had cost $5,000) to customers on credit, terms n/30.
9 Sold $20,000 of accounts receivable to Main Bank. Main charges a 4% factoring fee.
17 Received $5,859 cash from customers in payment on their accounts.
27 Borrowed $10,000 cash from Main Bank, pledging $12,500 of accounts receivable as security
for the loan.
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