Question

Artic Inc. is having a hard time collecting its outstanding Accounts Receivables from its customers. Artic...

Artic Inc. is having a hard time collecting its outstanding Accounts Receivables from its customers. Artic Inc. decides to factor $700,000 of its Accounts Receivables to Collection Co. on 1/1/20. Collection Co. assesses a finance charge of 5.85% of the factored Accounts Receivables, and retains an amount equal to 4.25% of the factored Accounts Receivables for probable adjustments.

**You may round your answers to the nearest dollar.

(A) If the factoring between Artic Inc. and Collection Co. is done without recourse what journal entry would Artic record in relation to the factoring on 1/1/20?

(B) Given the same set of facts as in (A) above (factoring is done without recourse), what journal entry would Collection Co. record in relation to the factoring on 1/1/20?

(C) If the factoring between Artic Inc. and Collection Co. is done with recourse what journal entry would Artic Inc. record in relation to the factoring on 1/1/20? Assume that any recourse obligation is deemed to have a fair market value of $25,000.

(D) Given the same set of facts as in (C) above (factoring is done without recourse), what journal entry would Collection Co. record in relation to the factoring on 1/1/20?

Homework Answers

Answer #1

(a) Without recourse in Artic Inc

Cash Dr 659050 (700000-40950)

Factoring expenses Dr 40950 (700000*5.58%)

Receivables Cr 700000

(Receivables factored )

(b) Without recourse in Collection agency

Receivables Dr 700000

Factoring Income Cr 40950

Cash Cr 659050

(c) With recourse in Artic Inc

Cash Dr 659050

Factoring expense Dr 40950

Factoring Collectors Cr 700000

(d) With recourse in Collection agency

Artic Dr 700000

Factoring income Cr 40950

Cash Cr 659050

  

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Wildhorse Incorporated factored $123,000 of accounts receivable with Sheffield Factors Inc. on a without-recourse basis. Sheffield...
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.
Sarasota Incorporated factored $167,400 of accounts receivable with Ivanhoe Factors Inc. on a without-recourse basis. Ivanhoe...
Sarasota Incorporated factored $167,400 of accounts receivable with Ivanhoe Factors Inc. on a without-recourse basis. Ivanhoe assesses a 2% finance charge of the amount of accounts receivable and retains an amount equal to 7% of accounts receivable for possible adjustments. Prepare the journal entry for Sarasota Incorporated and Ivanhoe Factors to record the factoring of the accounts receivable to Ivanhoe. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account...
Riverbed Incorporated factored $139,300 of accounts receivable with Marin Factors Inc. on a without-recourse basis. Marin...
Riverbed Incorporated factored $139,300 of accounts receivable with Marin Factors Inc. on a without-recourse basis. Marin assesses a 3% finance charge of the amount of accounts receivable and retains an amount equal to 5% of accounts receivable for possible adjustments. Prepare the journal entry for Riverbed Incorporated and Marin Factors to record the factoring of the accounts receivable to Marin. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account...
Urgent Bally Co. factors $3,000,000 of its accounts receivables without recourse for a finance charge of...
Urgent Bally Co. factors $3,000,000 of its accounts receivables without recourse for a finance charge of 4%. The finance company retains an amount equal to 8% of the accounts receivable for possible adjustments. Prepare the journal entry for Bally to record this transaction. Please use excel!!
On 1/1/Y2 Santee Corp. sold $1M of accounts receivable to Finco Inc. Finco charged a fee...
On 1/1/Y2 Santee Corp. sold $1M of accounts receivable to Finco Inc. Finco charged a fee equal to 5% of the receivables and retained an amount equal to 2% of the receivables for sales returns. i. Prepare Santee's journal entry to record the sale of receivables on 1/1/Y2, assuming the factoring arrangement is without recourse. Now assume that the arrangement was with recourse, and that the fair market value of the recourse liability was estimated at $25,000. Prepare the journal...
1. Nash Inc. factors receivables with a carrying amount of $247,900 to Joffrey Company for $172,700...
1. Nash Inc. factors receivables with a carrying amount of $247,900 to Joffrey Company for $172,700 on a with recourse basis. The recourse provision has a fair value of $1,640. This transaction should be recorded as a sale. Prepare the appropriate journal entry to record this transaction on the books of Nash Inc. (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...
1. Arness Woodcrafters sells $300,000 of receivables to Commercial Factors, Inc. on a with recourse basis....
1. Arness Woodcrafters sells $300,000 of receivables to Commercial Factors, Inc. on a with recourse basis. Commercial assesses a finance charge of 6% and retains an amount equal to 3% of accounts receivable. Arness estimates the fair value of the recourse obligation to be $8,000. Prepare the journal entry for (a) Arness and (b) Commercial Factors.
Arness Woodcrafters sells $300,000 of receivables to Commercial Factors, Inc. on a with recourse basis. Commercial...
Arness Woodcrafters sells $300,000 of receivables to Commercial Factors, Inc. on a with recourse basis. Commercial assesses a finance charge of 6% and retains an amount equal to 3% of accounts receivable. Arness estimated the fair value of the recourse obligation to be $8,000. Prepare the journal entry for (a) Arness and (b) Commercial Factors
Martinez Corp. factors $705,000 of accounts receivable with Tamarisk, Inc., Inc. on a with recourse basis....
Martinez Corp. factors $705,000 of accounts receivable with Tamarisk, Inc., Inc. on a with recourse basis. Tamarisk, Inc. will collect the receivables. The receivable records are transferred to Tamarisk, Inc. on August 15, 2020. Tamarisk, Inc. assesses a finance charge of 2.0% of the amount of accounts receivable and also reserves an amount equal to 5.00% of accounts receivable to cover probable adjustments. Martinez prepares financial statements under ASPE. Assume the conditions for to be recorded as a sale are...
On June 30, 2018, Blondie Fixtures was considering alternatives to bolster its cash position. Option One...
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...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT