Tera-In Problems Problem 6 Sales with Recouse A Change of Art (a tattoo removal

Question

Tera-In Problems Problem 6 Sales with Recouse A Change of Art (a tattoo removal company) sells (factors) $400,000 of accounts receivable to Factor, Inc. yith recourse. Factor, Inc. charges a 2% finance charge, and retains 4% of receivables for possible ndjustments due to sales discounts or returms. A Change of An estimates the recourse obligation is $5,000 (estimated amount of receivables that won't be collected) Record the sale from A Change of Art's perspective Six days after the sale of receivables to Factor, Inc. one ustomer files for bankruptcy. They owe $1,000 in AR. Record this from A Change of Art's perspective Record this from Factor, Inc.'s perspective: 109

Explanation / Answer

No. Accounts title Dr. Cr. In the Books of A change of Art : 1. Cash [400000- (400000 * (2% + 4%)] 376000 Due from Factor (400000* 4%) 16000 Loss on sale of receivables [400000 * 2% + 5000] 13000 To Recourse liability 5000 To Accounts receivable 400000 2. Recourse liability 1000 To Due from Factor Accounts 1000 In the Books of Factor, Inc : 2. Due to "A change of Art" 1000    To Accounts receivable 1000

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.