(4 points) Lucy factored $2,500,000 of accounts receivable with Ethel on a without recourse basis on May...
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- (4 points) Lucy factored $2,500,000 of accounts receivable with Ethel on a without recourse basis on May 1. Ethel assessed a finance charge of $15,000. Ethel retained an amount equal to 5% of the total ARs factored to cover sales returns. During May and June, customers returned merchandise to Lucy on $115,000 of credit sales. All of these returns related to receivables from the $2,500,000 pool of ARs sold. After taking the returns into consideration, Ethel collected $2,381,000 of the factored ARs. On June 30, Lucy and Ethel “settled up” meaning Lucy and Ethel paid each other any cash that was due the other.
- Prepare the entry Lucy should make on May 1.
- Prepare the entry Lucy should make on June 30.
- Based on the above facts, what net profit did Ethel end up earning?
- Based on the above facts, what net expense did Lucy end up incurring?
Related Book For
Intermediate Accounting
ISBN: 978-0132162302
1st edition
Authors: Elizabeth A. Gordon, Jana S. Raedy, Alexander J. Sannella
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