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Question 2 On April 1, 2019, Prince Company assigns $ 500,000 of its accounts receivable to the Hibernia bank as collateral for a $300,000 loan due July 1, 2019. The loan agreement calls for Prince Company to continue to collect the receivables. Among the $300,000, Hibernia bank has a finance charge of 2% of the accounts receivable. The bank charges interest on the loan is 10%. Instructions a. Prepare the April 1, 2019, journal entry for Prince Company. b. Prepare the journal entry for Prince's collection of $350,000 of the accounts receivable during the period from April 1, 2019 through June 30, 2019. C. On July 1 2019, Prince paid Hibernia all that was due from the loan it secured on April 1, 2019. Prepare the journal entry to record this payment.

Question 2 On April 1, 2019, Prince Company assigns $ 500,000 of its accounts receivable to the Hibernia bank as collateral for a $300,000 loan due July 1, 2019. The loan agreement calls for Prince Company to continue to collect the receivables. Among the $300,000, Hibernia bank has a finance charge of 2% of the accounts receivable. The bank charges interest on the loan is 10%. Instructions a. Prepare the April 1, 2019, journal entry for Prince Company. b. Prepare the journal entry for Prince's collection of $350,000 of the accounts receivable during the period from April 1, 2019 through June 30, 2019. C. On July 1 2019, Prince paid Hibernia all that was due from the loan it secured on April 1, 2019. Prepare the journal entry to record this payment.

FINANCIAL ACCOUNTING
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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Question 2 On April 1, 2019, Prince Company assigns $ 500,000 of its accounts receivable to the Hibernia bank as collateral for a $300,000 loan due July 1, 2019. The loan agreement calls for Prince Company to continue to collect the receivables. Among the $300,000, Hibernia bank has a finance charge of 2% of the accounts receivable. The bank charges interest on the loan is 10%. Instructions a. Prepare the April 1, 2019, journal entry for Prince Company. b. Prepare the journal entry for Prince's collection of $350,000 of the accounts receivable during the period from April 1, 2019 through June 30, 2019. C. On July 1 2019, Prince paid Hibernia all that was due from the loan it secured on April 1, 2019. Prepare the journal entry to record this payment.
Transcribed Image Text:Question 2 On April 1, 2019, Prince Company assigns $ 500,000 of its accounts receivable to the Hibernia bank as collateral for a $300,000 loan due July 1, 2019. The loan agreement calls for Prince Company to continue to collect the receivables. Among the $300,000, Hibernia bank has a finance charge of 2% of the accounts receivable. The bank charges interest on the loan is 10%. Instructions a. Prepare the April 1, 2019, journal entry for Prince Company. b. Prepare the journal entry for Prince's collection of $350,000 of the accounts receivable during the period from April 1, 2019 through June 30, 2019. C. On July 1 2019, Prince paid Hibernia all that was due from the loan it secured on April 1, 2019. Prepare the journal entry to record this payment.
Question 3 Prepare the journal entries required to record each of the following cases. (Each situation is independent.) 1. To obtain additional cash, Misumi factors without recourse of $20,000 of accounts receivable with Stills Finance. The finance charge is 10% of the amount factored. 2. To obtain a one-year notes payable $55,000, Misumi pledged the $ 65,000 of specific receivable accounts to Obihiro Financial. The finance charge is 8% of the loan. 3. Based on an aging analysis, an allowance of impairment of receivable $5,800 should be reported. Assume the allowance currently has a credit balance of $1,100. Question 4 Bohannon SA factors $ 250,000 of accounts receivable with Winkler Financing, without recourse basis. Winkler Financing will collect the receivables. The receivables records are transferred to Winkler financing on August 15, 2019. Winkler Financing assesses a finance charge of 2% of the amount of accounts receivable and also reserves an amount equal to 4% of accounts receivable to cover probable adjustments. Instructions a. What conditions must be met for a transfer/factor of receivables to be accounted for as a sale? b. Assume the conditions from part (a) are met. Prepare the journal entry on August 15, 2019, for Bohannon to record the sale of receivables.
Transcribed Image Text:Question 3 Prepare the journal entries required to record each of the following cases. (Each situation is independent.) 1. To obtain additional cash, Misumi factors without recourse of $20,000 of accounts receivable with Stills Finance. The finance charge is 10% of the amount factored. 2. To obtain a one-year notes payable $55,000, Misumi pledged the $ 65,000 of specific receivable accounts to Obihiro Financial. The finance charge is 8% of the loan. 3. Based on an aging analysis, an allowance of impairment of receivable $5,800 should be reported. Assume the allowance currently has a credit balance of $1,100. Question 4 Bohannon SA factors $ 250,000 of accounts receivable with Winkler Financing, without recourse basis. Winkler Financing will collect the receivables. The receivables records are transferred to Winkler financing on August 15, 2019. Winkler Financing assesses a finance charge of 2% of the amount of accounts receivable and also reserves an amount equal to 4% of accounts receivable to cover probable adjustments. Instructions a. What conditions must be met for a transfer/factor of receivables to be accounted for as a sale? b. Assume the conditions from part (a) are met. Prepare the journal entry on August 15, 2019, for Bohannon to record the sale of receivables.
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