[housebound5]

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.

Thanks,
housebound5

[acoello]

Accounts receivables
Cash

[acoello]

the accounts affected by the journal entry made by x company to record the finance charge are?

[morgaine300]

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.