Please assist me in preparing journal entries for the below scenarios, showing how you came up with your numbers.
QUESTION ONE:
Salen Company finances some of its current operations by assigning accounts receivable to a finance company. On July 1, 2012, it assigned, under guarantee, specific accounts amounting to $150,000. The finance company advanced to Salen 80% of the accounts assigned (20% of the total to be withheld until the finance company has made its full recovery), less a finance charge of 0.50% of the total accounts assigned.
On July 31, Salen Company received a statement that the finance company had collected $80,000 of these accounts and had made an additional charge of 0.50% of the total accounts outstanding as of July 31. This charge is to be deducted at the time of the first remittance due Salen Company from the finance company. (Hint: Make entries at this time.) On August 31, 2012, Salen Company received a second statement from the finance company, together with a check for the amount due. The statement indicated that the finance company had collected an additional $50,000 and had made a further charge of 0.50% of the balance outstanding as of August 31.
Make all entries on the books of Salen Company that are involved in the transactions above. Please show work and how you came up with your numbers.
QUESTION TWO:
On October 1, 2012, Arden Farm Equipment Company sold a pecan-harvesting machine to Valco Brothers Farm, Inc. In lieu of a cash payment, Valco Brothers Farm gave Arden a 2-year, $120,000, 8% note (a realistic rate of interest for a note of this type). The note required interest to be paid annually on October 1. Arden's financial statements are prepared on a calendar-year basis.
Assuming Valco Brothers Farm fulfills all the terms of the note, prepare the necessary journal entries for Arden Farm Equipment Company for the entire term of the note.