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    housebound5's Avatar
    housebound5 Posts: 1, Reputation: 1
    New Member

    Apr 29, 2006, 11:01 AM
    Preparing Journal Entries
    Prepare the journal entries on December 31, 2002, May 11, 2003, and June 12, 2003.

    Presented below are two independent situations.
    (a) On March 3, Lisa Ceja Appliances sells $700,000 of its receivables to Horatio Factors Inc. Horatio Factors assesses a finance charge of 3% of the amount of receivables sold. Prepare the entry on Lisa Ceja Appliances’ books to record the sale of the receivables.

    (b) On May 10, Worth Company sold merchandise for $4,000 and accepted the customer’s Firstar Bank MasterCard. At the end of the day, the Firstar Bank MasterCard receipts were deposited in the company’s bank account. Firstar Bank charges a 4% service charge for credit card sales. Prepare the entry on Worth Company’s books to record the sale of merchandise.

    Can anyone tell me how to start this problem? If I can just get started, I won't have any trouble.

    acoello's Avatar
    acoello Posts: 2, Reputation: 1
    New Member

    Jun 19, 2008, 11:34 AM
    Accounts receivables
    acoello's Avatar
    acoello Posts: 2, Reputation: 1
    New Member

    Jun 19, 2008, 11:35 AM
    the accounts affected by the journal entry made by x company to record the finance charge are?
    morgaine300's Avatar
    morgaine300 Posts: 6,561, Reputation: 276
    Uber Member

    Jun 19, 2008, 09:18 PM
    Factoring... hmm, intermediate topic. I'd have to look that up. It's not difficult. It's just that there's a couple of different ways to do this and I don't remember which one "factoring" is.

    As for the second one, a bank credit card is considered cash because it ends up in the bank accounts so quickly. The sale is still $4000 and needs to be recorded at the full amount. Since they're taking the 4% charge off (high charge!) right away, then figure out the 4% and charge it to something like Credit Card Charges, or whatever your book is calling them. The difference would be the cash you got.

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