Receivables Samson Wholesale Beverage Company regularly factors its accounts rec
ID: 2514190 • Letter: R
Question
Receivables Samson Wholesale Beverage Company regularly factors its accounts receivable with the Milpitas F the company the factored amount and retains 10%, When Milpitas collects the receivables, it remits to (5% of the total factored a Required: transferred $990,000 of accounts receivable to Milipitas. The transfer was made without recourse. Milgitas remits Son mount). Samson estimates the fair value of the last 10% of its receivables to be Shoo 90% of Samson the retained amont less a 5% Prepare the journal entries for Samson Wholesale Beverage for the transfer of accounts recevable on April 30 assuming the sale criteria are met. (If no entry is required for a transection/event, select "No journal entry required in the irst account field.) Journal entry worksheet Record the transfer of accounts receivable on Aprd 30. hote: Enter debits betare credits Record entry Next Prey 3 or4Explanation / Answer
Samson has transferred its accounts receivable for factoring. that means that factors will collect all the accounts receivable on behalf of Samson.
One type of factoring is non recourse factoring where the company will not buy back the accounts receivables if the factor could not collect the payments. In this type of factoring all the responsibilities are transferred to the factor and the company is assured of the payments without any non collectible risks.
the other type of factoring is recourse factoring where the company has to buy back the uncollected receivables. In this type, the risk is lying with the company.
In the given question, it is non recourse factoring i.e. the risk has been trasferred.
All the accounts rec of $990,000 has been transferred under non recourse factoring. Thus, accounts rec should be removed from the books of Samson thus will be credited. Samson will receive 90% of the 990,000 as cash = 990,000x90% = $891,000. Thus cash will be debited by 891,000. Further, the samson estimates their remaining 10% as 79,000. 50% of 79,000 = $39,500 will be received at the end of factor term (will be debited as receivable from factors) and remaining 39,500 is the fee for factoring which are expense for Samson (debited in profit and loss account). Now the entry will be -
On the date of transfer of accounts receivables -
Cash A/c Dr. 891,000
Receivables from factors A/c Dr. 39,500
Fee expenses A/c Dr. 39,500
To Accounts receivables a/c 990,000
(Being accounts receivables transferred to factors and estimated fee is charged)
Note - The fee and receivable from factors at the end of term is estimated which will be finalised at the end. TOday the samson estimated the amount.
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