Question

2. The Post, Inc. transferred $60,000 of accounts receivable to the Prudential Bank. The transfer was made with recourse. Prudential remits 90% of the factored amount to The Post, Inc. and retains 10% to cover sales returns and allowances. When the bank collects the receivables, it will remit to The Post, Inc. the retained amount (which The Post, Inc. estimate has a fair value of $5,000). The Post, Inc. anticipates a $3,000 recourse obligation. The bank charges a 2% fee (2% of $60,000), and requires that amount to be paid at the start of the factoring arrangement. Prepare the journal entry to record the transfer on the books of The Post, Inc. assuming the sale criteria are met [8 points)

Answer 1

Accounting Of Factoring With Recourse:

Answer is Explained Below

:

transfer on the Books Joumal Entry to record the of the Post, Inc. is as follows. Dr Cash al Der 54000 Loss on factoring 4200 Due from factor 84800 Recourse Liability Boob Accounts Receivable 60,000 Note: Cash z 60000 x 90x. z 54000 fee a 6oooo 24. z 1200 Retained Amount = 60000 - 54000-1200 4800 Recourse Liability < 3000 Loss on factoring z 1200 + 3000 - 4200.