In Order to Resolve Its Cash Flow Problems, Town Home

question 147

Essay

In order to resolve its cash flow problems, Town Home Company assigned $420,000 of its accounts receivable to Wargo Finance Company on August 1. Town Home received 85% of the assigned accounts receivable less a service charge of 5% of the cash received. Town Home was also charged 14% interest annually on the outstanding loan balance. By August 31, Town Home had collected $276,000, and remitted this amount plus the interest to date on August 31 to Wargo Finance.
Required:
a. Prepare journal entries to record the above assignment transactions on Town Home's books.
b. If Town Home collected an additional $50,000 on outstanding accounts and remitted this to Wargo Finance on September 30, how much additional interest must be paid on September 30?

Identify the purpose, components, and standards of a good financial statement analysis report.

Apply the concepts of vertical and horizontal financial statement analysis.

Assess short-term and long-term credit risk and profitability ratios between companies.

Calculate sales trend percentages and understand their implications.

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Definitions:

Social Responsibility

Refers to the ethical framework and obligation of an organization or individual to act for the benefit of society at large.

Society

A group of individuals living together in a more or less ordered community, often sharing customs, laws, and social institutions.

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Professionals responsible for ensuring that an organization's actions are in line with legal standards and ethical practices within their industry.