Pharoah Company follows ASPE. It manufactures sweatshirts for sale to athletic-wear retailers. The following summary information was available for Pharoah for the year ended December 31, 2019: Cash $24,000 Accounts receivable 42,000 Inventory 70,000 Accounts payable 62,000 Accrued liabilities 13,000 Part 2 Now assume that at year end 2020, Pharoah enters into the following transactions related to the company's receivables: 1. Pharoah sells the note receivable to Prairie Bank for $48,000 cash plus accrued interest. Given the creditworthiness of Pharoah's customer, the bank accepts the note without recourse and assesses a finance charge of 3.30%. Prairie Bank will collect the note directly from the customer. 2. Pharoah factors some accounts receivable at the end of the year. Accounts totalling $42,000 are transferred to Shamrock, Inc., with recourse. Shamrock retains 6% of the balances and assesses a finance charge of 4% on the transfer. Shamrock will collect the receivables from Logo's customers. The fair value of the recourse obligation is $3,600. Prepare the journal entry to record the transfer of the note receivable to Prairie Bank. (Round answers to O decimal places, e.g. 8,971. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.) Account Titles and Explanation Debit Credit Cash 48737 Loss on Disposal of Receivables 1663 Notes Receivable 48000 Interest Receivable 2400 Account Titles and Explanation Debit Credit Cash 37800 Due from Factor 2520 Loss on Disposal of Receivables 5280 Accounts Receivable 42000 Recourse Liability 3600 Calculate the current ratio and the receivables turnover ratio for Pharoah at December 31, 2020. (Round answers to 2 decimal places, e.g. 1.25.) Current Ratio Accounts Receivable Turnover times Pharoah Company follows ASPE. It manufactures sweatshirts for sale to athletic-wear retailers. The following summary information was available for Pharoah for the year ended December 31, 2019: Cash $24,000 Accounts receivable 42,000 Inventory 70,000 Accounts payable 62,000 Accrued liabilities 13,000 Part 2 Now assume that at year end 2020, Pharoah enters into the following transactions related to the company's receivables: 1. Pharoah sells the note receivable to Prairie Bank for $48,000 cash plus accrued interest. Given the creditworthiness of Pharoah's customer, the bank accepts the note without recourse and assesses a finance charge of 3.30%. Prairie Bank will collect the note directly from the customer. 2. Pharoah factors some accounts receivable at the end of the year. Accounts totalling $42,000 are transferred to Shamrock, Inc., with recourse. Shamrock retains 6% of the balances and assesses a finance charge of 4% on the transfer. Shamrock will collect the receivables from Logo's customers. The fair value of the recourse obligation is $3,600. Prepare the journal entry to record the transfer of the note receivable to Prairie Bank. (Round answers to O decimal places, e.g. 8,971. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.) Account Titles and Explanation Debit Credit Cash 48737 Loss on Disposal of Receivables 1663 Notes Receivable 48000 Interest Receivable 2400 Account Titles and Explanation Debit Credit Cash 37800 Due from Factor 2520 Loss on Disposal of Receivables 5280 Accounts Receivable 42000 Recourse Liability 3600 Calculate the current ratio and the receivables turnover ratio for Pharoah at December 31, 2020. (Round answers to 2 decimal places, e.g. 1.25.) Current Ratio Accounts Receivable Turnover times
