Exercise 7-19 Stellar Corp, factors $385,000 of accounts receivable with Pearl F

Question

Exercise 7-19 Stellar Corp, factors $385,000 of accounts receivable with Pearl Finance Corporation on a without recourse basis on July 1, 2017. The receivables records are transferred to Pearl Finance, which will receive the collections. Pearl Finance assesses a finance charge of 1.70% of the amount of accounts receivable and retains an amount equal to 5% of accounts receivable to cover sales discounts, returns, and allowances. The transaction is to be recorded as a sale. Prepare the journal entry on July 1, 2017, for Stellar Corp. to record the sale of receivables without recourse. (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 July 1, 2017 SHOW LIST OF ACCOUNTS LINK TO TEXT

Explanation / Answer

a Jul-01 Cash 359205 Due from Factor   19250 =385000*5% Loss on Sale of Receivables 6545 =385000*1.7%           Accounts Receivable 385000 b Jul-01 Accounts Receivable 385000          Due to Stellar Corp. 19250           Financing Revenue 6545            Cash 359205

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