Question

6. (7 points)Wood Incorporated factored $300,000 of accounts receivable with Engram Factors Inc. on a without recourse basis. Engram assesses a 3.50% finance charge of the amount of accounts receivable and retains an amount equal to 7% of accounts receivable for possible adjustments.Prepare the journal entry for Wood to record the sale. Also, record the journal entry for Engram Factors, Inc. to record the purchase of the receivables

6. (7 points) Wood Incorporated factored $300,000 of accounts receivable with Engram Factors Inc, on a without recourse basis. Engram assesses a 3.50% finance charge of the amount of accounts receivable and retains an amount equal to 7% of accounts receivable for possible adjustments. Prepare the journal entry for Wood to record the sale. Also, record the journal entry for Engram Factors, Inc. to record the purchase of the receivables Wood Inc.'s Journal Entry Accounts Debit Credit Engram Factor Inc.'s Journal Entry Accounts Debit Credit

Answer 1

Answer

Wood Inc's Journal Entry
Date	Account	Debit	Credit
	Cash	$                 268,500
	Factoring expense (or Loss on Sale of Receivable)	$                            10,500
	Due from Factor (Engram Factor Inc.)	$                            21,000
	Accounts Receivable		300000
	(To record sale of Receivable)
Engram Factor Inc's Journal Entry
Date	Account	Debit	Credit
	Accounts Receivable	300000
	Financing Revenue		$    10,500
	Due to Wood Inc.		$    21,000
	Cash		$ 268,500
	(To record purchase of receivable)