Problem 7-10 Pharoah Company finances some of its current operations by assignin
ID: 2395588 • Letter: P
Question
Problem 7-10 Pharoah Company finances some of its current operations by assigning accounts receivable to a finance company. On July 1, 2017, it assigned, under guarantee, specific accounts amounting to $465,000. The finance company advanced to Pharoah 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 0.60% of the total accounts assigned On July 31, Pharoah Company received a statement that the finance company had collected $248,000 of these accounts and had made an additional charge of 0.60% of the total accounts outstanding as of July 31. This charge is to be deducted at the time of the first remittance due Pharoah Company from the finance company. (Hint: Make entries at this time.) On August 31, 2017, Pharoah 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 $155,000 and had made a further charge of 0.60% of the balance outstanding as of August 31 Make all entries on the books of Pharoah Company that are involved in the transactions above. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit July 1 (To record the collection of accounts)Explanation / Answer
Journal entries
**Note
Cash Collections: $155000
less Interest payable (1302)
Interest Expense (372)
($465000-$248000-$155000)*0.6%
Notes payable (Balance) (124000)
($372000-$248000)
Cash Collected $29326
CA
Date Account,titles and explanation Debit Credit July 1 Cash $369210 Interest Expense($465000*0.60%) $2790 Notes Payable($465000*80%) $372000 July 31 Notes payable $248000 Accounts Receivable $248000 July 31 Interest Expense $1302 Interest Payable $1302 ($465000-$248000)*0.6% August 31 Notes Payable $124000 Cash** 29326 Interest Expense 372 Interest Payable 1302 Accounts Receivable $155000