PROBLEM 1 Garliet Company has entered into a long-term assignment agreement with CDE Bank. Under the terms of the financing agreement, Garliet Company received 80% of the value of all accounts assigned and is charged a 2% service charge, which is based upon the amount of cash received. In addition, the CDE Bank charges Garliet 10% interest on the outstanding loan. Garliet Company will continue to collect the assigned receivables. The following are the transactions related to the assignment: Jan. 1, 202X – Accounts receivable of P1,000,000 are assigned. Jan. 15, 202X – Garliet Company approves a sales return of P10,000 on the assigned accounts. Jan. 31, 202X – Collections are made on P600,000 of assigned accounts. This amount and one month's interest on the outstanding loan nare remitted to the finance company. Feb. 28, 202X – P300,000 of assigned accounts are collected, and the remaining loan is repaid. Requirements: Prepare the journal entry on Garliet Company's book to record the transactions. Assuming that the assignment agreement is on a notification basis, prepare the journal entry to record the transactions in the books of Garliet Company.
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.
PROBLEM 1 Garliet Company has entered into a long-term assignment agreement with CDE Bank. Under the terms of the financing agreement, Garliet Company received 80% of the value of all accounts assigned and is charged a 2% service charge, which is based upon the amount of cash received. In addition, the CDE Bank charges Garliet 10% interest on the outstanding loan. Garliet Company will continue to collect the assigned receivables. The following are the transactions related to the assignment:
Jan. 1, 202X –
Jan. 15, 202X – Garliet Company approves a sales return of P10,000 on the assigned accounts.
Jan. 31, 202X – Collections are made on P600,000 of assigned accounts. This amount and one month's interest on the outstanding loan nare remitted to the finance company.
Feb. 28, 202X – P300,000 of assigned accounts are collected, and the remaining loan is repaid.
Requirements:
- Prepare the
journal entry on Garliet Company's book to record the transactions. - Assuming that the assignment agreement is on a notification basis, prepare the journal entry to record the transactions in the books of Garliet Company.
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 4 images
