Question

On 1 April 20X5, XCourt Company transferred $ 75,000 of accounts receivable to Prima Finance Company to obtain immediate cash. Consider the two following independent circumstances.

Required:
1. The transfer agreement specified a price of $ 64,200 on a no-recourse, notification basis that effectively transferred legal control to Prima. Prima is permitted to resell the accounts receivables without permission from XCourt. Give the entry/ entries that XCourt Company should make. The $ 10,800 reduction from face value represents a $ 6,800 financing fee and $ 4,000 of expected bad debts that are already in the allowance for doubtful accounts. Explain the basis for your response.
2. The transfer agreement specified a price of $ 70,000 on a with- recourse, notification basis. The $ 5,000 reduction from face value is related to expected bad debts, $ 2,000, and a $ 3,000 financing fee. he bad debt amount is already in the allowance for doubtful accounts. XCourt retained the right to repurchase the receivables; Prima is not permitted to resell the accounts receivable unless XCourt is given first refusal on the transaction. Give the entry/ entries that XCourt should make.
3. Explain the difference to the statement of financial position between requirements 1 and



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  • CreatedFebruary 17, 2015
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