Whispering Corporation factors $252,500 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 adjustments.
(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 Whispering to record the
sale of receivables, assuming the recourse liability has a fair
value of $4,390. (If no entry is required, select "No Entry" for
the account titles and enter 0 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
Journal Entry | ||||
Date | Particulars | Dr. Amt. | Cr. Amt. | |
15-Aug-17 | Cash | 237,350.00 | $252,500 X 94% | |
Due from Factor | 10,100.00 | $252,500 X 4% | ||
Loss on Sale of Receivable | 9,440.00 | |||
Recourse Liability | 4,390.00 | |||
Accounts Receivable | 252,500.00 |
Whispering Corporation factors $252,500 of accounts receivable with Kathleen Battle Financing, Inc. on a with recourse...
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