Presented below is information for Sunland Company. 1. Beginning-of-the-year Accounts Receivable balance was $19,600. 2. Net sales (all on account) for the year were $103,100. Sunland does not offer cash discounts. 3. Collections on accounts receivable during the year were $88,200. Sunland is planning to factor some accounts receivable at the end of the year. Accounts totaling $11,100 will be transferred to Credit Factors, Inc. with recourse. Credit Factors will retain 5% of the balances for probable adjustments and assesses a finance charge of 4%. The fair value of the recourse obligation is $1,143. Prepare the journal entry to record the sale of the receivables.
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.
Presented below is information for Sunland Company.
| 1. | Beginning-of-the-year |
|
| 2. | Net sales (all on account) for the year were $103,100. Sunland does not offer cash discounts. | |
| 3. | Collections on accounts receivable during the year were $88,200. |
Sunland is planning to factor some accounts receivable at the end of the year. Accounts totaling $11,100 will be transferred to Credit Factors, Inc. with recourse. Credit Factors will retain 5% of the balances for probable adjustments and assesses a finance charge of 4%. The fair value of the recourse obligation is $1,143.
Prepare the
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