Reference no: EM132910187

Question 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 -

a. Prepare the journal entry on Garliet Company's book to record the transactions.

b. Assuming that the assignment agreement is on a notification basis, prepare the journal entry to record the transactions in the books of Garliet Company.

Question 2 - Salen Company finances some of its current operations by assigning accounts receivable to a finance company. On July 1, 2020, it assigned, under guarantee, specific accounts amounting to P150,000. 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). It is less a finance charge of 1⁄2% of the total accounts assigned.

On July 31, Salen Company received a statement that the finance company had collected P80,000 of these accounts and had made an additional charge of 1⁄2% of the total accounts outstanding as of July 31. This charge is to be deducted at the time of the first remittance due to Salen Company from the finance company. On August 31, 2020, 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 had collected an additional P50,000 and had made a further charge of 1⁄2% of the balance outstanding as of August 31.

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