Brandon Corporation assigned its accounts receivable to the Bank of Terrace Bay on March 1, 2021 as
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Question:
Amount of accounts receivable assigned to the Bank of Terrace Bay $923,190
Amount of loan made by Bank of Terrace Bay to Brandon Corporation $600,000
Amount of commission charged by Terrace Bay to Brandon (percentage of loan amount) 4%
Amount of assigned accounts collected by Brandon during March 2021 $294,000
Interest rate on the loan 6%
Brandon Corporation follows ASPE.
Required:
1. Prepare journal entries for Brandon Corporation for each of the following items:
a) Receipt of the loan proceeds. (1.5 marks)
b) Collection of accounts receivable. (1 mark)
c) Loan payment (including any interest paid). (2 marks)
2. Assume that instead of getting a loan, Brandon Corporation sold its receivables on a with-recourse basis to the Bank of Terrace Bay on March 1, 2021. Other information about this factoring arrangement follows:
Estimated fair value of recourse obligation $6,661
Finance fee charged by Terrace Bay (as percentage of accounts receivable) 4%
Sale proceeds withheld by Terrace Bay for expected future returns (as percentage of accounts receivable) 3%
Prepare the journal entry required for Brandon Corporation on March 1, 2021. (3.5 marks)
Related Book For
Financial Accounting Tools for Business Decision Making
ISBN: 978-1119493631
9th edition
Authors: Paul D. Kimmel, Jerry J. Weygandt, Donald E. Kieso
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