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.)
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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