Handout Problem for Credit I. Accounts Receivable Assignment: ACCT 3311; Ch 7 On January 1, L&M Enterprises executes a $600,000 note payable to Worthen Bank to borrow cash. L&M assigns $700,000 of their Accounts Receivable as collateral on the note Worthen Bank charges L&M a finance charge of .75% (.0075) of the Accounts Receivable when the loan originates L&M must remit net cash collections from Accounts Receivable monthly, as well as any accrued interest at 6%, until the loan is repaid January: L&M collected $250,000 of Accounts Receivable February: L&M collected $80,000 of Accounts Receivable March: L&M collected $300,000 of Accounts Receivable Instructions: Prepare JEs for L&M for the life of the note, including the cash collections by L&M. (7 JEs; be sure to make a T account for the Note Payable, so you will properly calculate Interest Expense for each note payment) II. Sale of Accounts Receivable with recourse: L&M sells $200,000 of Accounts Receivable with recourse to Conway Factors, receiving cash. Conway factors retains 5% to cover possible sales returns, etc. Conway Factors will charge L&M a 3% factoring fee, due at the time the receivables are factored. Once Conway Factors has collected the receivables, it will remit the retained amount to L&M. L&M estimates the fair value of the retained amount to be $9,000. L&M estimates the fair value of the recourse obligation to be $4,000. Instructions: Prepare the journal entry for L&M to record the sale of the AR. (1 JE) III. Sale of Accounts Receivable without recourse: Assume the same sale of AR took place as described above, except that the sale is without recourse. Instructions: Prepare the journal entry for L&M to record the sale of the AR. (1 JE) IV. Sale of Accounts Receivable without recourse: Assume the same sale of AR took place as described in problem III, without recourse. In addition, Conway Factors does not require the factoring fee to be paid on the date of sale. Instead, they will net the 3% fee from the retained amount in the future. Instructions: Prepare the journal entry for L&M to record the sale of the AR. (1 JE)