Question

Listed below are 2 independent situations involving the disposition of receivables.
Prepare the necessary journal entries.
Colaw Company sells $700,000 of its receivables to Speedy Factors.
Speedy Factors assesses a finance charge of 3% of the amount of the receivables.
Prepare the journal entry that Colaw would make to record the sale of the recievables.
What I am assuming I will be doing is 700,000 x3 so 700,000 -21,000 so cash db 679,000 loss of sale receivable debit 21,000 account receivable credit 700,000?
A restaurant is the site for a large company party.   The bill totals $5,200 and is charged by
the company on a Mastercard.
Assume a 4% service fee is charged by Mastercard.
Record the journal entry that the restaurant would make to record this transaction.

& for this one it would be the same merhod? thank you im really confused.

Answer 1

The required journal entries for both the independent situation is shown as follows:-

Situation	Account Titles and Explanation	Debit	Credit
1)	Cash (700,000-21,000)	679,000
	Service Charge Expense (700,000*3%)	21,000
	Accounts Receivable		700,000
	(To record the sale of accounts receivable)
2)	Cash (5,200-208)	4,992
	Credit Card Expense (5,200*4%)	208
	Accounts Receivable		5,200
	(To record the credit card expense and amount received)

Notes:-

1) Accounts receivable of $700,000 is sold and a finance charge of 3% of the amount of the receivables is debited to service charge expense. (i.e. $700,000*3% = $21,000).

2) Service fee of 4% charged bu master card is debited to credit card expense.