a. 5) Nash is planning to factor some $14,100 will be transferred to Credit Fact
ID: 2524404 • Letter: A
Question
a. 5) Nash is planning to factor some $14,100 will be transferred to Credit Factors, Inc. with recourse. the balances for recourse obligation is $1,021. receivable at the end of the year. Accounts totaling Credit Factors will retain 7% of adjustments and assesses a finance charge of 6%. The fair value of the 2 a) Prepare the journal entry to record the sale of the receivables on a recourse basis Cash Swe from factors Debit Credi l loss of Salus 100 without b) Prepare the journal entry to record the sale of the receivables on a Accants Yecevall 14100 nuR Put to Customer Cas hExplanation / Answer
(a).
Accounts Title & Explanation
Debit
Credit
Cash
$12267
Due from factor ($14100 * 0.07)
$987
Loss on sale of receivables
$1867
Accounts receivable
$14100
Recourse liability
$1021
(For recording sale of accounts receivable on a recourse basis)
Working Note;
1. Cash received will be calculated as follow;
$14100 – ($14100 * 0.07) – ($14100 * 0.06) = $12267
2. Loss on sale of receivable will be calculated as follow;
$1021 + ($14100 * 0.06) = $1867
(b).
Accounts Title & Explanation
Debit
Credit
Cash
$12267
Due from factor ($14100 * 0.07)
$987
Loss on sale of receivables
$846
Accounts receivable
$14100
(For recording sale of accounts receivable on without a recourse basis)
Working Note;
1. Cash received will be calculated as follow;
$14100 – ($14100 * 0.07) – ($14100 * 0.06) = $12267
2. Loss on sale of receivable will be calculated as follow;
($14100 *0.06) = $846
Accounts Title & Explanation
Debit
Credit
Cash
$12267
Due from factor ($14100 * 0.07)
$987
Loss on sale of receivables
$1867
Accounts receivable
$14100
Recourse liability
$1021
(For recording sale of accounts receivable on a recourse basis)
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