Lonergan Company occasionally uses its accounts receivable to obtain immediate cash. At the end of June 2018, the company had accounts receivable of $1,180,000. Lonergan needs approximately $700,000 to capitalize on a unique investment opportunity. On July 1, 2018, a local bank offers Lonergan the following two alternatives: Borrow $700,000, 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 9% interest on the unpaid balance of the note at the beginning of the period. Transfer $750,000 of specific receivables to the bank without recourse. The bank will charge a 4% factoring fee on the amount of receivables transferred. The bank will collect the receivables directly from customers. The sale criteria are met.

Required: 1. Prepare the journal entries that would be recorded on July 1 for:

a. alternative a.

b. alternative b.

2. Assuming that 80% of all June 30 receivables are collected during July, prepare the necessary journal entries to record the collection and the remittance to the bank for:

a. alternative a.

b. alternative b.

Journal entry worksheet Record the borrowing $700,000, sign a note payable, and assign the entire receivable balance as collateral. Note: Enter debits before credits. General Journal Debit Credit Date July 01, 2018 Record entry Clear entry View general journal Journal entry worksheet Record the transfer $750,000 of specific receivables to the bank without recourse. The bank will charge a 4% factoring fee on the amount of receivables transferred. Note: Enter debits before credits. General Journal Debit Credit Date July 01, 2018 IL Record entry Clear entry View general journal Journal entry worksheet Record the collection of receivables, assuming that 80% of all June 30 receivables are collected on July 31. Note: Enter debits before credits. Date General Journal Debit Credit July 01, 2018 Journal entry worksheet