JFK Corp. factors $300,000 of accounts receivable with LBJ Finance Corporation on a without recourse basis on

Question:

JFK Corp. factors $300,000 of accounts receivable with LBJ Finance Corporation on a without recourse basis on July 1, 2020. The receivables records are transferred to LBJ Finance, which will receive the collections. LBJ Finance assesses a finance charge of 1½% of the amount of accounts receivable and retains an amount equal to 4% of accounts receivable to cover sales discounts, returns, and allowances. The transaction is to be recorded as a sale.

Instructions

a. Prepare the journal entry on July 1, 2020, for JFK Corp. to record the sale of receivables without recourse.

b. Prepare the journal entry on July 1, 2020, for LBJ Finance Corporation to record the purchase of receivables without recourse.

Accounts Receivable
Accounts receivables are debts owed to your company, usually from sales on credit. Accounts receivable is business asset, the sum of the money owed to you by customers who haven’t paid.The standard procedure in business-to-business sales is that... Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...

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