Assume that on January 1 of the current year, with the net realizable value of accounts receivable equal to 470,000, the company decided to factor 400,000 of accounts receivable to Gustav Factors, Ltd. Gustav retains 6% of the amount factored as a reserve or hold back. Gustav Factors also charged Council a 4% financing fee (4% of the total factored amount). As a result, only 90% of the proceeds are remitted. Instruction: Prepare the journal entry to record the factoring of 400,000 of account receivable assuming that Council sold the receivable with recourse.
Assume that on January 1 of the current year, with the net realizable value of accounts receivable equal to 470,000, the company decided to factor 400,000 of accounts receivable to Gustav Factors, Ltd. Gustav retains 6% of the amount factored as a reserve or hold back. Gustav Factors also charged Council a 4% financing fee (4% of the total factored amount). As a result, only 90% of the proceeds are remitted. Instruction: Prepare the journal entry to record the factoring of 400,000 of account receivable assuming that Council sold the receivable with recourse.
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter6: Cash And Receivables
Section: Chapter Questions
Problem 10RE: On December 1 of the current year, Jordan Inc. assigns 125,000 of its accounts receivable to...
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Question
Assume that on January 1 of the current year, with the net
realizable value of accounts receivable equal to 470,000, the
company decided to factor 400,000 of accounts receivable to
Gustav Factors, Ltd. Gustav retains 6% of the amount factored as
a reserve or hold back. Gustav Factors also charged Council a 4%
financing fee (4% of the total factored amount). As a result, only
90% of the proceeds are remitted.
Instruction: Prepare the
400,000 of account receivable assuming that Council sold the
receivable with recourse.
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