On May 1, Beach, Inc. Factored $700,000 of accounts receivable with Ever Finance on a with recourse basis instead. The recourse provision has a fair value of $20,000. Under the arrangement, Beach was to handle disputes concerning service and Ever Finance was to make the collections, handle the sales discounts, and absorb the credit losses. Ever Finance assessed a finance charge of 6% of the total accounts receivable factored and retained an amount equal to 4% of the total receivables to cover sales discounts. How much is the cash proceeds from factoring Beach should record on May 1?
Bad Debts
At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
On May 1, Beach, Inc. Factored $700,000 of
How much is the cash proceeds from factoring Beach should record on May 1?
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