Question

Flounder Corporation factors $251,700 of accounts receivable with Kathleen Battle Financing, Inc. on a with recourse basis. Kathleen Battle Financing will collect the receivables. The receivables records are transferred to Kathleen Battle Financing on August 15, 2017. Kathleen Battle Financing assesses a finance charge of 2% of the amount of accounts receivable and also reserves an amount equal to 4% of accounts receivable to cover probable adjustment 2n Battle Financing will collect the receivables (b) Assume that the conditions are met for the transfer of receivables with recourse to be accounted for as a sale. Prepare the journal entry on August 15, 2017, for Flounder to record the sale of receivables, assuming the recourse liability has a fair value of $5,010. (If no entry is required, select "No Entry" for the account titles and enter o for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit Aug. 15, 2017 Cash Due from Factor Loss on Sale of Receivables Recourse Liability Accounts Receivable

Answer 1

Journal entry:

Date	Account title	debit	credit
Aug 15, 2017	Cash Due from factor ($251700 x 4%) loss on sale of receivables {($251700 x 2%) + $5010} Recourse liability Accounts receivable	$236598 $10068 $10044 . .	. . . $5010 $251700