Answered

Welcome to Westonci.ca, the place where your questions are answered by a community of knowledgeable contributors. Ask your questions and receive detailed answers from professionals with extensive experience in various fields. Discover in-depth answers to your questions from a wide network of professionals on our user-friendly Q&A platform.

Kingbird Corporation factors $275,100 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, 2020. 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 a transfer of receivables with recourse to be accounted for as a sale. Prepare the journal entry on August 15, 2020, for Kingbird to record the sale of receivables, assuming the recourse obligation has a fair value of $3,670.

Sagot :

abiolataiwo2015

Answer:

August 15, 2020

Dr Cash $258,594

Dr Due from factor $11,004

Dr Loss on sale of receivables $9,172

Cr Accounts receivable $275,100

Cr Recourse liability $3,670

Explanation:

Preparation of the journal entry on August 15, 2020, for Kingbird to record the sale of receivables

August 15, 2020

Dr Cash $258,594

($275,100+$3,670-$9,172-$11,004)

Dr Due from factor $11,004

Dr Loss on sale of receivables $9,172

Cr Accounts receivable $275,100

Cr Recourse liability $3,670

(Being to record the sale of receivables)

Calculation for Due from factor

Due from factor = $275,100 * 0.04

Due from factor = $11,004

Calculation for Loss on sale of receivables

Loss on sale of receivables = ($275,100 * 2%) + $3,670

Loss on sale of receivables = $5,502 + $3,670

Loss on sale of receivables = $9,172

Thank you for choosing our platform. We're dedicated to providing the best answers for all your questions. Visit us again. Thanks for stopping by. We strive to provide the best answers for all your questions. See you again soon. Stay curious and keep coming back to Westonci.ca for answers to all your burning questions.