help me asap pleaseHomework Answers
| Note : | Following calculations are made on the basis of best assumptions can be made as per the information provided in given problems. The answer might be different as answers provided by other expert on the basis of different assumptions taken by other expert. | ||
| Relevant Calculations | |||
| Amount in "$" | |||
| Factor contract amount | 400000 | ||
| Less: Factor Reserves (Amount retain)- 4% of 400000 | -16000 | ||
| Balance before finance charges | 384000 | ||
| Less: Finance charge by Nancy factors from Jack Company -5% of 384000 | -19200 | ||
| Balance before factors commission | 364800 | ||
| Less: Factors commission- 6% of 400000 | -24000 | ||
| Net amount advanced by Nancy factors to Jack company whether factor's contract on guarantee or without guarantee for credit losses | 340800 | ||
| Note: Since factor commission is same whether in case of factor's contract on guarantee or without guarantee basis for credit losses, above calculations are same for both the cases | |||
| Answer (A) | Factors contract without guarantee basis | ||
| Journal Entries (Jack company) | Amount in "$" | ||
| Date | Particulars | Debit | Credit |
| 1 Sep. X8 | Jack company | 340800 | |
| Finance charges | 19200 | ||
| Factor commissions | 24000 | ||
| Provision for Bad debts (provision made for credit losses in future) | 16000 | ||
| To Credit Receivables | 400000 | ||
| (Being amount booked for factor contract with Nancy factors) | |||
| Note : it is estimated that the future losses shall be equal to amount retained by Nancy factors | |||
| Note: since factor is without guarantee basis provision has been made for amount retain by Nancy factors for future contingencies of credit losses | |||
| 1 Sep. X8 | Profit and loss account | 43200 | |
| To Factor charges | 19200 | ||
| To Factor commissions | 24000 | ||
| (Being amount transferred to profit and loss account) | |||
| Answer (B) | Factors contract with guarantee basis | ||
| Journal Entries (Jack company) | Amount in "$" | ||
| Date | Particulars | Debit | Credit |
| 1 Sep. X8 | Jack company | 356800 | |
| Finance charges | 19200 | ||
| Factor commissions | 24000 | ||
| To Credit Receivables | 400000 | ||
| (Being amount booked for factor contract with Nancy factors) | |||
| Note : it is estimated that the future losses shall be equal to amount retained by Nancy factors | |||
| Note: since factor is with guarantee basis amount retain by factor is included in factor's net payable amount. | |||
| 1 Sep. X8 | Profit and loss account | 43200 | |
| To Factor charges | 19200 | ||
| To Factor commissions | 24000 | ||
| (Being amount transferred to profit and loss account) | |||
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entry for Engram Factors, Inc. to record the purchase of the
receivables
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entry for Engram Factors, Inc. to record the purchase of the
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