On June 30, 2018, Blondie Fixtures was considering alternatives to bolster its cash position. Option One...
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On June 30, 2018, Blondie Fixtures was considering alternatives to bolster its cash position. Option One called for transferring $390,000 in accounts receivable to Dogwood Finance Company without recourse for a 4% fee. Option Two calls for Blondie to transfer the $390,000 in receivables to Dogwood with recourse. Dogwood's charges a 3% fee for receivables factored with recourse. Option Two meets the conditions to be considered a sale, but Blondie estimates a $2,900 recourse liability. Under either option, Dogwood will immediately remit 85% of the factored receivables to Blondie, and retain 15%. When Dogwood collects the remaining receivables, it remits the amount, less the fee, to Blondie. Blondie estimates that the fair value of the final 15% of the receivables is $24,500 (ignoring the factoring fee). Required: 1. Prepare any necessary journal entry or entries if receivables are factored under Option One. 2. Prepare any necessary journal entry or entries if receivables are factored under Option Two. On June 30, 2018, Blondie Fixtures was considering alternatives to bolster its cash position. Option One called for transferring $390,000 in accounts receivable to Dogwood Finance Company without recourse for a 4% fee. Option Two calls for Blondie to transfer the $390,000 in receivables to Dogwood with recourse. Dogwood's charges a 3% fee for receivables factored with recourse. Option Two meets the conditions to be considered a sale, but Blondie estimates a $2,900 recourse liability. Under either option, Dogwood will immediately remit 85% of the factored receivables to Blondie, and retain 15%. When Dogwood collects the remaining receivables, it remits the amount, less the fee, to Blondie. Blondie estimates that the fair value of the final 15% of the receivables is $24,500 (ignoring the factoring fee). Required: 1. Prepare any necessary journal entry or entries if receivables are factored under Option One. 2. Prepare any necessary journal entry or entries if receivables are factored under Option Two.
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Answer rating: 100% (QA)
Date Particulars Debit Credit Cash 85 of 390000 331500 Loss on sal... View the full answer
Related Book For
Advanced Accounting
ISBN: 978-1259444951
13th edition
Authors: Joe Ben Hoyle, Thomas Schaefer, Timothy Doupni
Posted Date:
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