A. The Wiley Book Company transferred $300,000 of accounts receivable to the Ame

Question

A. The Wiley Book Company transferred $300,000 of accounts receivable to the American Trust Bank. The transfer was made without recourse. American Trust remits 90% of the factored amount and retains 10% (Wiley estimates the fair value of that 10% to be $20,000). when the bank collects the receivables, will remit to Wiley the retained amount less a 1% fee ( 1% of the total factored amount). Prepare the journal entry to record the transfer on the books of Wiley assuming that the sale criteria are met. a. The Wiley Book Company transferred S100,000 of accounts receivable to the American Trust Bank. The transfer was made with recourse. American Trust remits 90% of the factored amount and retains 10% (Wiley estimates the fair value of that 10% to be $6,000). When the bank collects the receivables, will remit to Wiley the retained amount less a 190 fee (1% of the total factored amount). Wiley anticipates a $2,000 recourse obligation. Prepare the journal entry to record the transfer on the books of Wiley assuming that the "sale" criteria are met. c. On March 1, 2016, the Wiley Book Company assigns S150,000 of accounts receivable to the American Trust Bank as collateral for an $90,000 loan due in six months. Wiley ll continue to collect the receivables. American Trust assesses a finance charge of 2% of the accounts receivable at the initiation of the loan; interest on the loan is 5%, payable six months later. I. Prepare the March 1, 2016 journal entry for Fullbright. 2. Prepare the journal entry for Wiley when it pays back the loan with interest on Aug 31,2016.

Explanation / Answer

(a) Cash $        270,000 Loss on sale of receivables $          13,000 Receivable from factor ($20,000 fair value - $3,000 fee) $          17,000 Accounts receivable (balance sold) $        300,000 (b) Cash $          90,000 Loss on sale of receivables $            7,000 Receivable from factor ($6,000 fair value - $1,000 fee) $            5,000 Recourse liability $             2,000 Accounts receivable (balance sold) $        100,000 (c ) Cash $          87,000 Finance charge (2% x 150,000) $            3,000 bank Loan $          90,000 Accounts Receivable Assigned $        150,000 Accounts Receivable $        150,000 Loan $          90,000 Interset Expense $            2,250 Cash $          92,250

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