Lonergan Company occasionally uses its accounts receivable to obtain immediate cash. At the end of June 2024, the company had accounts receivable of $1,020,000. Lonergan needs approximately $620,000 to capitalize on a unique investment opportunity. On July 1, 2024, a local bank offers Lonergan the following two alternatives:

a. Borrow $620,000, sign a promissory note, 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.

b. Transfer $670,000 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: Prepare the journal entries that would be recorded on July 1 for:

alternative a.

alternative b.

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:

alternative a.

alternative b.

Req. 1A:

Record the borrowing $620,000, sign a note payable, and assign the entire receivable balance as collateral.

Req 1B:

Record the transfer $670,000 of specific receivables to the bank without recourse. The bank will charge a 2% factoring fee on the amount of receivables transferred.

Req. 2A:

Record the collection of receivables, assuming that 80% of all June 30 receivables are collected on July 31.

Req. 2B:

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.