On June 30, 2018, Blondie Fixtures was considering
alternatives to bolster its
cash position. Option One called for transferring P400,000 in
accounts receivable to Dogwood Finance
Company without recourse for a 5% fee. Option Two calls for Blondie
to transfer the P400,000 in receivables
to Dogwood with recourse. Dogwood's charges a 4% fee for
receivables factored with recourse. Option Two
meets the conditions to be considered a sale, but Blondie estimates
a P3,000 recourse liability. Under either
option, Dogwood will immediately remit 90% of the factored
receivables to Blondie, and retain 10%. When
Dogwood collects the remaining receivables, it remits the amount,
less the fee, to Blondie. Blondie estimates
that the fair value of the final 10% of the receivables is P25,000
(ignoring the factoring fee).
Based on the above data, answer the following:
1. The necessary journal entry or entries if receivables are
factored under Option One would be
2. The necessary journal entry or entries if receivables are
factored under Option Two would be
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