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Lone Star Company occasionally uses its accounts receivable to obtain immediate cash. At the end of June, 2 0 1 4 , the company had
Lone Star Company occasionally uses its accounts receivable to obtain immediate cash. At the end of June, the company had accounts receivable of $ and an Allowance for Doubtful Accounts of $cr During the period from July Sept. Lone Star had sales on account of $ collected $ on unassigned accounts and wrote off $ of unassigned accounts receivable. Lone Star also collected $ from a customer whose account had previously been written off not included in the $ aboveHINT: Use your taccounts on page handout to help you reconcile the and ADAtaccounts using this information.
On August Lone Star assigned $ of the accounts receivable to XYZ Finance and received of the value of the accounts assigned less a finance fee of $ XYZ charges per month APR on the outstanding loan balance. Cash collections from assigned accounts are to be remitted monthly to XYZ and cover principal and accrued interest for the month. During August, Lone Star collected $ in cash of the accounts receivable assigned and, in addition, accepted sales returns of $ on assigned accounts. During September, Lone Star collected $ in cash and, in addition, wrote off $ of assigned accounts as uncollectible.
On September Lone Star estimated of the total accounts receivable and accounts receivable assigned to be uncollectible.
Required: Use the above information to determine each of the following:
a Determine how much Interest Expense Lone Start would report on their quarterly income statement for the period July thru Sept from the accounts receivable assigned. Remember the fee charged initially to receive the loan is considered part of the "cost to borrow" so it needs to be included in the interest expense.
b What is Bad Debt Expense for the July Sept quarterly period?
a
b
C Prepare the receivables section of the Balance Sheet dated September
tableAccounts Receivable General,,???Accounts Receivable Assigned,???,Less: Note Payable, Equity in Accounts Receivable Assigned,,$
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