Question

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 is entered. Do not indent manually.)

2.

Metlock Corp. factors $441,000 of accounts receivable with Bonita Finance Corporation on a without recourse basis on July 1, 2020. The receivables records are transferred to Bonita Finance, which will receive the collections. Bonita Finance assesses a finance charge of 1.80% of the amount of accounts receivable and retains an amount equal to 6% of accounts receivable to cover sales discounts, returns, and allowances. The transaction is to be recorded as a sale.

(a)

Prepare the journal entry on July 1, 2020, for Metlock Corp. to record the sale of receivables without recourse. (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 is entered. Do not indent manually.)

Answer 1

Solution-

1)

No.	General Journal	Debit ($)	Credit ($)
1.	Cash	172700
	Loss on sales receivable	76840
	Recourse liability		1640
	Accounts receivable		247900

Workings-

*

Cash received	$172700
Less : Recourse liability	1640
Net proceeds	$171060

*

Carrying value	$247900
Net proceeds	$171060
Loss on sale of receivables	$76840

2) (a)

Date	Account Titles and Explanation	Debit ($)	Credit ($)
July 1,2020	Cash	406602
	Loss on sale of receivables [441000*1.80%]	7938
	Due from factor [441000*6%]	26460
	Accounts receivable		441000

answered by: anonymous