Lonergan Company occasionally uses its accounts receivable to obtain immediate cash. At the end of June 2016, the company had accounts receivable of $780,000. Lonergan needs approximately $500,000 to capitalize on a unique investment opportunity. On July 1, 2016, a local bank offers Lonergan the following two alternatives:

a.

Borrow $500,000, sign a note payable, and assign the entire receivable balance as collateral. At the end of each month, a remittance will be made to the bank that equals the amount of receivables collected plus 12% interest on the unpaid balance of the note at the beginning of the period.

b.

Transfer $550,000 of specific receivables to the bank without recourse. The bank will charge a 2% factoring fee on the amount of receivables transferred. The bank will collect the receivables directly from customers. The sale criteria are met.

Required:

1. & 2.	Prepare the journal entries that would be recorded for each of the alternatives. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
	Alternative a:
	Borrow $500,000, sign a note payable, and assign the entire receivable balance as collateral. Record the collection of receivables, assuming that 80% of all June 30 receivables are collected on July 31. At the end of each month, a remittance will be made to the bank that equals the amount of receivables collected plus 12% interest on the unpaid balance of the note at the beginning of the period. Alternative b: Transfer $550,000 of specific receivables to the bank without recourse. The bank will charge a 2% factoring fee on the amount of receivables transferred. Record the collection of receivables, assuming that 80% of all June 30 receivables are collected on July 31. The bank will collect the transferred receivables directly