On November 30, Petrov Company has $135,500 of accounts receivable and uses the perpetual inventory system. December 4 Sold $6,715 of merchandise (that had cost $4,298) to customers on credit, terms n/30. December 9 Sold $18,970 of accounts receivable to Main Bank. Main charges a 6% factoring fee. December 17 Received $3,693 cash from customers in payment on their accounts. December 27 Borrowed $10,840 cash from Main Bank, pledging $14,092 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?
Bad Debts
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 Company has $135,500 of
| December 4 | Sold $6,715 of merchandise (that had cost $4,298) to customers on credit, terms n/30. |
|---|---|
| December 9 | Sold $18,970 of accounts receivable to Main Bank. Main charges a 6% factoring fee. |
| December 17 | Received $3,693 cash from customers in payment on their accounts. |
| December 27 | Borrowed $10,840 cash from Main Bank, pledging $14,092 of accounts receivable as security for the loan. |
(1) Prepare
(2) Which transaction would most likely require a note to the financial statements?
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