Bohannon Corporation factors 250,000 of accounts receivable with Winkler Financing, Inc. on a without guarantee (no recourse)
Question:
Bohannon Corporation factors €250,000 of accounts receivable with Winkler Financing, Inc. on a without guarantee (no recourse) basis. Winkler Financing will collect the receivables. The receivables records are transferred to Winkler Financing on August 15, 2015.
Winkler Financing assesses a finance charge of 2% of the amount of accounts receivable and also reserves an amount equal to 4% of accounts receivable to cover probable adjustments.
Instructions
(a) What conditions must be met for a transfer of receivables with recourse to be accounted for as a sale?
(b) Assume the conditions from part (a) are met. Prepare the journal entry on August 15, 2015, for Bohannon to record the sale of receivables.
Step by Step Answer:
Intermediate Accounting IFRS Edition
ISBN: 9781118443965
2nd Edition
Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield