White Corporation has entered into a long-term assignment agreement with a finance company. Under the terms of this agreement, White receives 80% of the value of all accounts assigned and is charged a 1% service charge which is based upon the actual dollar amount of cash received. Additionally, the finance company charges White 12% annual interest on the outstanding loan. The following selected transactions relate to this agreement:
December 1, 2007 Accounts receivable of $160,000 are assigned.
December 11, 2007 A sales return of $1,000 on an assigned account is allowed by White.
December 31, 2007 Collections are made on $86,000 of assigned accounts. This amount and 1 month’s interest on the outstanding loan are remitted to the finance company. (For simplicity, compute interest to the nearest month.)
January 29, 2008 $50,000 of assigned accounts are collected and the remainder of the loan is repaid.
Required
1. Prepare journal entries on White’s books to record the preceding transactions.
2. How would this assignment agreement be reported on White’s December 31, 2007 balance sheet (assume the note payable is short-term)?