Question

Exercise 7-21 Presented below is information for Jones Company. 1. 2. 3. Beginning-of-the-year Accounts Receivable balance was $15,000. Net sales (all on account) for the year were $100,000. Jones does not offer cash discounts. Collections on accounts receivable during the year were $70,000. Jones is planning to factor some accounts receivable at the end of the year. Accounts totaling $25,000 will be transferred to Credit Factors, Inc. with recourse. Credit Factors will retain 5% of the balances for probable adjustments and assesses a finance charge of 4%. The fair value of the recourse obligation is $1,200. Your answer is partially correct. Try again. Prepare the journal entry to record the sale of the receivables. (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.)

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Answer 1

Journal Entry Debit ($) Credit ($) Date Account Titles Cash =25000-(25000*4%)-1250 |=SUM(E6:E7)-D3-D5 |=E7*5% $ 22,750 Loss on sale of receivable Receivable from factor Recourse Liability $ 2,200 1,250 1,200 $ 25,000 Accounts Receivable Beginnin Accounts Receivable Ending Accounts Receivable Average Accounts Receiable $ 15,000 $ 25,000 $ 20.000 Sales $100,000 Accounts Receivable turnover =Net Sales / Average Accounts Receivable Accounts Receivable turnover =$100,000 / $20,000 Accounts Receivable turnover 5.00 Days to collect accounts receiavble Days to collect accounts receiavble Days to collect accounts receiavble = 365 days / Accounts Receivable turnover =365 days / 5.00 73.00

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