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Beyoncé Corporation factors $268,800 of accounts receivable with Kathleen Battle

ID: 2449324 • Letter: B

Question

Beyoncé Corporation factors $268,800 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, 2014. 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, 2014, for Beyoncé to record the sale of receivables, assuming the recourse liability has a fair value of $4,650. (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

Show List of Accounts

Date

Account Titles and Explanation

Debit

Credit

August 15, 2014

Explanation / Answer

Beyonce Corporation Particulars Amt $ 1 Accounts receivable    268,800 2 Finance Charge @2% of AR         5,376 3 Recourse Liability(fair value)         4,650 4 Loss on sale of receivables=2+3      10,026 5 Retention amount @4% of AR      10,752 6 Cash Received from Factor    252,672 Date Journal Entry Dr $ Cr $ Aug 15.2014. Cash    252,672 Due from Factor      10,752 Loss on sale of Receivables      10,026 Recourse Liability         4,650 Accounts Receivable    268,800 Total    273,450    273,450