In 2014, Ibran Corp. required additional cash for its business. Management decided to use accounts receivable to raise the additional cash and has asked you to determine the income statement effects of the following transactions:
l. On July 1, 2014, Ibran assigned $600,000 of accounts receivable to Provincial Finance Corporation as security for a loan. !bran received an advance from Provincial Finance of 90% of the assigned accounts receivable less a commission of 3% on the advance. Before December 31, 2014, Ibran collected $220,000 on the assigned accounts receivable, and remitted $232,720 to Provincial Finance. Of the latter amount, $12,720 was interest on the advance from Provincial Finance.
2. On December 1, 2014, Ibran sold $300,000 of accounts receivable to Wunsch Corp. for $275,000. The receivables were sold outright on a without recourse basis and Ibran has no continuing interest in the receivables.
3. On December 31, 2014, an advance of $120,000 was received from First Bank by pledging $160,000 of Ibran's accounts receivable. Ibran's first payment to First Bank is due on January 30, 2015.
Instructions
Prepare a schedule showing the income statement effects of these transactions for the year ended December 31, 2014.