Question : Presented below is information related to Lathorp Corp., which sells merchandise with

terms 2/10, net 60. Lathorp records its sales and receivables net.

Oct 1- Lathorp Corp. sold to Pittman Co. merchandise having a sales price of $10,000.

Oct 5- Accounts receivable of $12,000 (gross) are factored with Neophyte Credit Corp.

Without recourse at a financing charge of 8%. Cash is received for the proceeds;

Collections are handled by the finance company. (These accounts were all past the

Discount period.)

Oct 9- Specific accounts receivable of $10,000 (gross) are pledged to Aladin Credit Corp.

As security for a loan of $5,000 at a finance charge of 7% of the amount of the loan.

The finance company will make the collections. (All the accounts receivable are past

The discount period.)

Nov 15-Lathorp Corp. factors receivables with a carrying amount of $30,000 to Anderson

Inc. for $25,000 on a with recourse basis. The recourse provision has a fair value of

$800. This transaction should be recorded as a sale.

Dec 31- Pittman Co.. notifies Lathorp that it is bankrupt and will pay only 15% of its account.

Give the entry to write off the uncollectible balance using the allowance method.

(Note: First record the increase in the receivable on Oct 11 when the discount period

passed.)

Dec 31- It sold a land having a fair value of $300,000 in exchange for a 3-year zero-interest-

bearing promissory note in the face amount of $399,297. The land is carried on

Lathorp's book at a cost of $175,000. (Note: Lathorp recently had to pay 7% interest

for money that it borrowed from NRB Bank. The customer in this transaction has

credit rating that requires him to borrow money at 10% interest.

Instructions

all necessary entries in general journal entries for Lathorp Corp.