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AccountingIntermediate Accounting: Reporting And Analysis3rd Edition

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Chapter 6, Problem 10P
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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

Solutions

Chapter
Section
Problem 1GI
Problem 2GI
Problem 3GI
Problem 4GI
Problem 5GI
Problem 6GI
Problem 7GI
Problem 8GI
Problem 9GI
Problem 10GI
Problem 11GI
Problem 12GI
Problem 13GI
Problem 14GI
Problem 15GI
Problem 16GI
Problem 17GI
Problem 18GI
Problem 19GI
Problem 20GI
Problem 21GI
Problem 22GI
Problem 23GI
Problem 24GI
Problem 25GI
Problem 26GI
Problem 27GI
Problem 1MC
Problem 2MC
Problem 3MC
Problem 4MC
Problem 5MC
Problem 6MC
Problem 7MC
Problem 8MC
Problem 9MC
Problem 10MC
Problem 11MC
Problem 1RE
Problem 2RE
Problem 3RE
Problem 4RE
Problem 5RE
Problem 6RE
Problem 7RE
Problem 8RE
Problem 9RE
Problem 10RE
Problem 11RE
Problem 12RE
Problem 13RE
Problem 14RE
Problem 15RE
Problem 16RE
Problem 1E
Problem 2E
Problem 3E
Problem 4E
Problem 5E
Problem 6E
Problem 7E
Problem 8E
Problem 9E
Problem 10E
Problem 11E
Problem 12E
Problem 13E
Problem 14E
Problem 15E
Problem 16E
Problem 17E
Problem 18E
Problem 19E
Problem 20E
Problem 21E
Problem 22E
Problem 23E
Problem 24E
Problem 1P
Problem 2P
Problem 3P
Problem 4P
Problem 5P
Problem 6P
Problem 7P
Problem 8P
Problem 9P
Problem 10P
Problem 11P
Problem 12P
Problem 13P
Problem 14P
Problem 15P
Problem 16P
Problem 17P
Problem 18P
Problem 19P
Problem 1C
Problem 2C
Problem 3C
Problem 4C
Problem 5C
Problem 6C
Problem 7C
Problem 8C
Problem 9C
Problem 10C
Problem 12C
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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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Factoring Accounts Receivable Faeber Textile Company frequently factors its accounts receivable. During 2019, Faeber made credit sales of $100,000 to customers, under terms of 2/10, n/30. Faeber records its credit sales using gross price. In 2019, Faeber sold $70,000 of these receivables to a factor. The factor remitted 90% of the accounts receivable factored and charged a 12% commission on the gross amount of the factored receivables. The factoring agreement also requires Faeber to be responsible for any cash discounts taken by customers upon payment of the factored receivables. Faeber is charged for these cash discounts upon reimbursement by the factor. During 2019, the factor collected the remaining amount of the factored receivables, minus the 2% discount on 94% of the collected receivables, and returned the balance owed to Faeber. Faeber collected the remaining amount of the unfactored accounts receivable, minus the 2% discount on 96% of the collected receivables.

Required:

Prepare all the journal entries necessary for Faeber to record the preceding information.

To determine

Prepare journal entry to record the given transactions.

Explanation

Account receivable:

The amount of money to be received by a company for the sale of goods and services to the customers is referred to as account receivable.

DateAccount Titles and explanationDebit ($)Credit ($)
 Accounts receivable100,000 
      Sales 100,000
 (To record the sale made )  

Table (1)

  • Accounts receivable is an asset and there is an increase in the value of asset. Hence, debit the accounts receivable by $100,000.
  • Sales (Revenue) are a component of stockholder’s equity and there is an increase in the value of equity. Hence, credit the sales by $100,000.
DateAccount Title and ExplanationDebitCredit
 Cash (2)54,600 
 Factory expense (1)8,400 
 Receivables from factor(3)7,000 
      Accounts receivable 70,000
 ( To record sale of  receivables to the  factor)  

Table (2)

  • Cash is an asset and there is an increase in the value of an asset. Hence, debit the cash by $54,600.
  • Factory expense is a component of stockholder’s equity and there is an increase in the value of expense. Hence, debit the factory expense by $8,400.
  • Receivables from factor are an asset and there is an increase in the value of asset. Hence, debit the receivables from factor by $7,000.
  • Accounts receivable is an asset and there is a decrease in the value of asset. Hence, credit the accounts receivable by $70,000.
DateAccount Title and ExplanationDebit in $Credit in $
 Cash ($7,000−$1,316)5,684 
 Sales  revenue (4)1,316 
      Receivables from factor 7,000
 ( To record  collection of  remaining factory receivables by giving discount)  

Table (3)

  • Cash is an asset and there is an increase in the value of an asset. Hence, debit the cash by $5,684.
  • Sales revenue is component of stockholder’s equity and there is a decrease in the value of revenue. Hence, debit the sales revenue by $1,316.
  • Receivables from factor are an asset and there is an increase in the value of asset. Hence, debit the receivables from factor by $7,000.
DateAccount Titles and explanationDebit ($)Credit ($)
 Cash29,424 
 Sales revenue  (5)576 
      Accounts receivable ($100,000−$70,000)  30,000
 (To record the sale made )  

Table (4)

  • Cash is an asset and there is an increase in the value of asset

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Ch-6 P-1GICh-6 P-2GICh-6 P-3GICh-6 P-4GICh-6 P-5GICh-6 P-6GICh-6 P-7GICh-6 P-8GICh-6 P-9GICh-6 P-10GI
Ch-6 P-11GICh-6 P-12GICh-6 P-13GICh-6 P-14GICh-6 P-15GICh-6 P-16GICh-6 P-17GICh-6 P-18GICh-6 P-19GICh-6 P-20GICh-6 P-21GICh-6 P-22GICh-6 P-23GICh-6 P-24GICh-6 P-25GICh-6 P-26GICh-6 P-27GICh-6 P-1MCCh-6 P-2MCCh-6 P-3MCCh-6 P-4MCCh-6 P-5MCCh-6 P-6MCCh-6 P-7MCCh-6 P-8MCCh-6 P-9MCCh-6 P-10MCCh-6 P-11MCCh-6 P-1RECh-6 P-2RECh-6 P-3RECh-6 P-4RECh-6 P-5RECh-6 P-6RECh-6 P-7RECh-6 P-8RECh-6 P-9RECh-6 P-10RECh-6 P-11RECh-6 P-12RECh-6 P-13RECh-6 P-14RECh-6 P-15RECh-6 P-16RECh-6 P-1ECh-6 P-2ECh-6 P-3ECh-6 P-4ECh-6 P-5ECh-6 P-6ECh-6 P-7ECh-6 P-8ECh-6 P-9ECh-6 P-10ECh-6 P-11ECh-6 P-12ECh-6 P-13ECh-6 P-14ECh-6 P-15ECh-6 P-16ECh-6 P-17ECh-6 P-18ECh-6 P-19ECh-6 P-20ECh-6 P-21ECh-6 P-22ECh-6 P-23ECh-6 P-24ECh-6 P-1PCh-6 P-2PCh-6 P-3PCh-6 P-4PCh-6 P-5PCh-6 P-6PCh-6 P-7PCh-6 P-8PCh-6 P-9PCh-6 P-10PCh-6 P-11PCh-6 P-12PCh-6 P-13PCh-6 P-14PCh-6 P-15PCh-6 P-16PCh-6 P-17PCh-6 P-18PCh-6 P-19PCh-6 P-1CCh-6 P-2CCh-6 P-3CCh-6 P-4CCh-6 P-5CCh-6 P-6CCh-6 P-7CCh-6 P-8CCh-6 P-9CCh-6 P-10CCh-6 P-12C

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