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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 titles are automatically indented when the amount is entered. Do not indent manually.)

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Answer #1
The following journal entry will be prepared for Sarasota Incorporated:
Account Titles Debit Credit
Cash [ $167,400 - ($167,400 x 2%) - ($167,400 x 7%) ] 152334
Due from factor ($167,400 x 7%) 11718
Loss on sale of receivable ($167,400 x 2%) 3348
           Accounts receivable 167400
The following journal entry will be prepared for Ivanhoe Factors Inc.
Account Titles Debit Credit
Accounts receivable 167400
           Due to Sarasota 11718
           Interest Revenue 3348
           Cash 152334
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