Question

Wildhorse Incorporated factored $123,000 of accounts receivable with Sheffield Factors Inc. on a without-recourse basis. Sheffield assesses a 2% finance charge of the amount of accounts receivable and retains an amount equal to 6% of accounts receivable for possible adjustments.

Prepare the journal entry for Wildhorse Incorporated and Sheffield Factors to record the factoring of the accounts receivable to Sheffield.

Answer 1

General Journal	Debit	Credit
Wildhorse Inc.
Cash	113,160
Due from Factor	7,380		(6% x $123,000)
Loss on Sale of Receivable	2,460		(2% x $123,000)
Accounts Receivable		123,000
Sheffield Factors Inc.
Accounts Receivable	123,000
Due to customer		7,380
Finance Revenue		2,460
Cash		113,160