Question

Presented below is information for Swifty Company. 1. Beginning-of-the-year Accounts Receivable balance was $18,800. 2. Net sales (all on account) for the year were $107,500. Swifty does not offer cash discounts. 3. Collections on accounts receivable during the year were $83,900. Swifty is planning to factor some accounts receivable at the end of the year. Accounts totaling $13,200 will be transferred to Credit Factors, Inc. with recourse. Credit Factors will retain 6% of the balances for probable adjustments and assesses a finance charge of 5%. The fair value of the recourse obligation is $1,193. Prepare the journal entry to record the sale of the receivables. Compute Swifty’s accounts receivable turnover for the year, assuming the receivables are sold. Accounts receivable turnover. Days to collect accounts receivable

Answer 1

Account Titles & Explanation	Debit($)	Credit($)
Cash	11748
Loss on sale of receivables (13200*5%)+1193	1853
Receivable from factor (13200*6%)	792
Recourse liability		1193
Accounts receivable		13200

A	opening accounts receivable	18800
B	net sales(credit)	107500
C	collected during the year	83900
D	closing accounts receivable(A+B-C)	42400
E	Average accounts receivable	(A+D)/2
	(18800+42400)/2	30600
F	Accounts receivable turnover	B/E Times
	(107500 / 30600)	3.51 times
G	Days to collect accounts receivable	365/F
		365/3.51
		103.88
		104 days approximately