On July 31, Orwell Co. has $448,800 of accounts receivable. Required:1. Prepare journal entries to record the following selected August transactions. The company uses the perpetual inventory system. 2. Also prepare any footnotes to the August 31 financial statements that result from these transactions.3. Calculate the balance in the Accounts Receivable account as of August 10. Aug. 3Sold $250,000 of merchandise (that cost $122,000) to customers on credit.Aug. 5Sold $300,000 of accounts receivable to Cash Solutions. Cash Solutions charges a 7% factoring fee.Aug. 8Received $165,200 from customers in payment on their accounts.Aug. 9Borrowed $50,000 cash from State Bank, pledging $65,000 of accounts receivable as security for the loan. The note is a 90-day, 9% note.
What will be an ideal response?
1.
| Aug. 3 | ? | Accounts Receivable..................................................... | 250,000 | ? |
| ? | ? | Sales......................................................... | ? | 250,000 |
| 3 | ? | Cost of goods sold........................................ | 122,000 | ? |
| ? | ? | Merchandise Inventory............................................... | ? | 122,000 |
| 5 | ? | Cash (300,000 ? 21,000)............................... | 279,000 | ? |
| ? | ? | Factoring fee expense (300,000 * .07).... | 21,000 | ? |
| ? | ? | Accounts Receivable................................................... | ? | 300,000 |
| Aug. 8 | ? | Cash............................................................ | 165,200 | ? |
| ? | ? | Accounts Receivable................................ | ? | 165,200 |
| Aug. 9 | ? | Cash.............................................................. | 50,000 | ? |
| ? | ? | Notes Payable.......................................... | ? | 50,000 |
Accounts receivable of $65,000 are pledged as security for a $50,000 note payable.
3. Accounts receivable balance: $233,600
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