On January 1, 2020, Caribou Explorations Limited (CEL) sold inventory costing $32,000 and, in exchange, received $6,000 cash and a $40,000 promissory note. The five-year note was repayable in equal annual instalments of $8,734 including interest at 7%. The market rate of interest for similar transactions was 7%. The first payment was due January 1, 2021. CEL has a December 31 year-end and follows IFRS. CEL uses the net method. CEL also extends generous payment terms to its many customers. As a result, the company has accumulated a substantial portfolio of accounts receivables. To improve cash flow, the company decided to sell some of its receivables to a factor. On June 30 2020, CEL factored $300,000 of its account receivables. CEL had previously checked the creditworthiness of its customers and is, therefore, confident that only a few accounts will be uncollectible. Therefore, the company c
On January 1, 2020, Caribou Explorations Limited (CEL) sold inventory costing $32,000 and, in exchange, received $6,000 cash and a $40,000 promissory note. The five-year note was repayable in equal annual instalments of $8,734 including interest at 7%. The market rate of interest for similar transactions was 7%. The first payment was due January 1, 2021. CEL has a December 31 year-end and follows IFRS. CEL uses the net method.
CEL also extends generous payment terms to its many customers. As a result, the company has accumulated a substantial portfolio of accounts receivables. To improve cash flow, the company decided to sell some of its receivables to a factor. On June 30 2020, CEL factored $300,000 of its
Question:
1; Prepare the
2; Prepare the journal entry on the books of CEL for the transfer of the receivables with recourse on June 30, 2020
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