The controller for Bramble Corporation has reached an agreement with Sheffield Financing Ltd. to sell a large portion of Bramble'spast-due accounts receivable. Bramble agrees to sell $1,820,000 of accounts receivable to Sheffield without recourse. Bramble'scontroller estimates that the fair value of uncollectible accounts is $163,000. Sheffield will charge Bramble 9% of the total receivablesbalance as a financing fee, and will withhold an initial amount of 10%. The transaction is treated as a sale.(a)-Your answer is partially correct.Calculate the net proceeds and the gain or loss on the disposal of receivables to Sheffield Financing Ltd.Net proceedsLoss Von disposal of receivables$$1493200326800

Sales are made on cash and credit basis. The amount to be collected from sales made on credit basis…

Answered: The controller for Bramble Corporation…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter3: Evaluation Of Financial Performance

Section: Chapter Questions

Problem 16P

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The controller for Concord Corporation has reached an agreement with Riverbed Financing Ltd. to sell a large portion of Concord’s past-due accounts receivable. Concord agrees to sell $1,840,000 of accounts receivable to Riverbed with recourse. Concord’s controller estimates that the fair value of Concord’s liability to pay Riverbed for uncollectible accounts is $165,000. Riverbed will charge Concord 8% of the total receivables balance as a financing fee, and will withhold an initial amount of 9%.Calculate the net proceeds and the gain or loss on the disposal of receivables to Riverbed Financing Ltd. Net proceeds $ ( Loss / Gain ) on disposal of receivables $ Prepare the journal entry on the books of Concord Corporation to record the disposal of receivables to Riverbed Financing Ltd. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the…
Furman Corporation entered into an assignment agreement with a finance company whereby Furman would be advanced 80% of all accounts assigned, minus a $2,000 service charge. The assignment does not meet the conditions for a sale and should be accounted for as a secured borrowing. During the year, $300,000 of accounts receivable were assigned, $220,000 collections were made on outstanding assigned accounts, and $210,000 was remitted to the finance company. This remittance included interest charges of $2,100. Sales returns and allowances on assigned accounts amounted to $5,000. Required: 1. Prepare the journal entries necessary to record the preceding information. 2. Show how the preceding information would be reported on Furman’s year-end balance sheet (assume the note payable is short-term).
Mountain High Ice Cream Company transferred $60,000 of accounts receivable to the Prudential Bank. The transfer was made with recourse. Prudential remits 90% of the factored amount to Mountain High and retains 10% to cover sales returns and allowances. When the bank collects the receivables, it will remit to Mountain High the retained amount (which Mountain estimates has a fair value of $5,000). Mountain High anticipates a $3,000 recourse obligation. The bank charges a 2% fee (2% of $60,000), and requires that amount to be paid at the start of the factoring arrangement.Required:Prepare the journal entry to record the transfer on the books of Mountain High assuming that the sale criteria are met. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
Otter company has a receivable amounting to P1,200,000 otter had previously established an allowance for bad debts of 50,000 in connection with these receivables.otter company sold these receivables with recourse for P1,060,000. Otter received P1,000,000 cash immediately from the factor. the remaining P60,000 will be received once the factor verifies that none of the receivables is in dispute. control was surrendered by Otter. the fair value of the recourse obligation is P26,000The loss on factoring to be recognized by Otter Company is?
Mountain High Ice Cream Company transferred $60,000 of accounts receivable to the Prudential Bank. The transfer was made with recourse. Prudential remits 90% of the factored amount to Mountain High and retains 10%to cover sales returns and allowances. When the bank collects the receivables, it will remit to Mountain Highthe retained amount (which Mountain estimates has a fair value of $5,000). Mountain High anticipates a $3,000recourse obligation. The bank charges a 2% fee (2% of $60,000), and requires that amount to be paid at the startof the factoring arrangement.Required:Prepare the journal entry to record the transfer on the books of Mountain High assuming that the sale criteria are met.
The Statement of Affairs for Ivan Corporation shows that approximately P0.78 on the peso probably will be paid to unsecured creditors without priority. The corporation owes JICR Company P23,000 on a promissory note, plus accrued interest on P940. Inventories with a current fair value of P19,200 collateralized the note payable. Compute the amount that JICR Company should receive from Ivan Corporation assuming that the actual payments to unsecured creditors without priority consist of 78% of total claims.
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?
ABC Company decides to sell a part its portfolio of trade receivables to the factoring company. The following relates to the factored receivables: Carrying amount of receivables ₱4,000,000 Fair value of the receivables 4,040,000 Cash received from factoring 3,830,000 The related contract stipulates that: Payment for the receivables ₱3,800,000 Payment for the Guarantee 30,000 According to the guarantee, ABC Company agrees to refund the credit losses from the portfolio of receivables up to ₱450,000 to the factoring company. The necessary journal entry or entities if receivables to record the factoring would include a. Debit to Cash ₱3,800,000 b. Debit to Loss on sale of receivable, ₱200,000 c. Credit to Liability, ₱480,000 d. Debit to Receivable from Factor, ₱25,000
Daniel Martin and John Duke contracted with J & S Distributors, Inc., to purchase a KIS Magnum Speed printer for $17,000. The parties agreed that Martin and Duke would send one-half of the money as a deposit and would pay the balance upon delivery. They also agreed to the following provision: In the event of non-payment of the balance of the purchase price reflected herein on due date and in the manner recorded or on such extended date which may be caused by late delivery on the part of [the seller], the Customer shall be liable for: (1) immediate payment of the full balance recorded herein; and (2) payment of interest at the rate of 12 percent per annum calculated on the balance due, when due, together with any attorney’s fees, collection charges and other necessary expenses incurred by [the seller]. When the machine arrived five days late, Martin and Duke refused to accept it, stating that the company had purchased a substitute machine elsewhere. Martin and Duke requested the…
Singer Corporation was involved in the following events in the current year: June 30 Barney Manufacturing gives Singer a $3,000, 11%, 90-day note for merchandise purchased. July 15 Dillon Construction Co. gives Singer a $9,000, 10%, 60-day note for merchandise originally purchased, on account, on April 20 of the current year. 30 The Barney and Dillon notes are sold with recourse by Singer at its bank at 12%. The estimated fair value of the recourse liability is $1,800. Sept 15 The bank notifies Singer that the Dillon note was paid. 30 The bank notifies Singer that Barney defaulted on the note and charges the amount of principal, interest, and a fee of $20 against Singer’s bank account. Prepare the journal entries to record the preceding information on Singer’s accounting records. Assume that the company does not normally sell its notes.
White Corporation has entered into an agreement to transfer accounts receivable to Murphy Company. Under the terms of this agreement, White receives 80% of the value of all the transferred accounts receivable (to reflect credit risk) and is charged a 1% service charge, which is based upon the dollar amount of transferred receivables. Interest is charged at an annual interest rate of 12% of any outstanding loan balance. The transferred receivables will continue to be collected by White with any cash flows being remitted to Murphy at the end of each month. White is not allowed to transfer the receivables to anyone else. White normally transfers its accounts receivable. The following selected 2019 transactions relate to this agreement: Dec 1 Accounts receivable of $160,000 are transferred. 11 A sales return of $1,000 on a transferred account is made. 31 Collections are made on $82,000 of the transferred accounts receivable plus interest for the month of December. This amount is…
Sakuragi Corporation engaged in the following transactions with regards to financing of receivable during 2021:· On February 1, Sakuragi company factored receivables with a face amount of P300,000 BPI. BPI assessed a factoring fee of 3% of the receivables and retains 5% of the receivables factored. The factoring was done on a without recourse basis, thus transferring all significant risks and rewards related to the receivables to BPI.· On October 1,2021, Sakuragi discounted one year 10% P40,000 interest-bearing notes receivable that will mature on December 31,2021 to Mitsui Bank without recourse. The bank’s discount rate was 15%.· Obtained a P500,000, 6 month, 15% loan from Citibank on November 1, 2021. The company pledge P600,000 of accounts receivable as security for the loan. Sakuragi received the loan less the total interest in advance and a 2% of the loaned amount as service charge.How much is the total cash received from the financing of accounts receivables?…

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