P7-7 (Assigned Accounts Receivable – Journal Entries)

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Intermediate Accounting, 13th Edition

by Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield

March 2009, ©2010

ISBN 978-0-470-37494-8

P7-7 (Assigned Accounts Receivable – Journal Entries) Salen Company finance some of its current operations by assigning accounts receivable to a finance company. On July 1, 2010, it assigned, under guarantee, specific accounts amounting to $150,000. The finance company advanced to Salen 80% of the accounts assigned (20% of the total to be withheld until the finance company has made its full recovery), less a finance charge of ½% of the total accounts assigned.

On July 31 Salen Company received a statement that the finance company had collected $80,000 of these accounts and had made an additional charge of ½% of the total accounts outstanding as of July 31. This charge is to be deducted at the time of the first remittance due Salen Company from the finance company. (Hint: Make entries at this time.) On August 31, 2010,  Salen Company received a second statement from the finance company, together with a check for the amount due. The statement indicated that the finance company, together with a check for the amount due. The statement indicated that the finance company had collected an additional $50,000 and had made further charge of ½% of the balance outstanding as of August 31.

Instructios

Make all entries on the books of Salen Company that are involved in the transactions above