Reference no: EM132944069
Question - Lucid Company showed the following balances on December 31:
Accounts receivable-unassigned 1,000,000
Accounts receivable assigned 300,000
Allowance for doubtful accounts January 1 30,000
Receivable from factor 40,000
Note payable-bank 240,000
During the current year, the entity found itself in financial distress and decided to resort to receivable financing.
On June 30, the entity factored P200,000 of accounts receivable to a finance entity.
The finance entity charged a factoring fee of 5% of the accounts factored and withheld 20% of the amount factored.
On December 31, the entity assigned P300,000 of accounts receivable to a bank under a nonnotification basis.
The bank advanced 80% less a service fee of 5% of the accounts assigned. The entity signed a promissory note for the loan.
On December 31, it is estimated that 5% of the outstanding accounts receivable may prove uncollectible.
Required -
1. Prepare journal entry to record the factoring.
2. Prepare journal entry to record the assignment.
3. Prepare journal entry to adjust the allowance for doubtful accounts on December 31.
4. Indicate the classification, presentation and disclosure of the accounts receivable involved in receivable financing.
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