Inder Corporation is experiencing a temporary cash shortage and decides to transfer a group of its accounts receivable to Newton Company on March 22. Inder does not normally transfer its receivables. Newton accepts $110,000 of Inder’s accounts receivable, remits 80% of the accounts receivable transferred, and charges a 16% commission on the gross amount of the transferred receivables. Title to the receivables is transferred to Newton, and Newton has the right to assign, pledge, or sell the receivables. During the period, sales returns and allowances on transferred accounts amounted to $1,000. Required: 1. Prepare all the journal entries necessary by Inder to record the preceding information assuming the transfer was without recourse. 2. Prepare all the journal entries necessary by Inder to record the preceding information assuming the transfer was with recourse and the recourse obligation had an estimated fair value of $5,600. 3. Assume that Inder uses IFRS. How would your answers to Requirements 1 and 2 change?
Inder Corporation is experiencing a temporary cash shortage and decides to transfer a group of its accounts receivable to Newton Company on March 22. Inder does not normally transfer its receivables. Newton accepts $110,000 of Inder’s accounts receivable, remits 80% of the accounts receivable transferred, and charges a 16% commission on the gross amount of the transferred receivables. Title to the receivables is transferred to Newton, and Newton has the right to assign, pledge, or sell the receivables. During the period, sales returns and allowances on transferred accounts amounted to $1,000. Required: 1. Prepare all the journal entries necessary by Inder to record the preceding information assuming the transfer was without recourse. 2. Prepare all the journal entries necessary by Inder to record the preceding information assuming the transfer was with recourse and the recourse obligation had an estimated fair value of $5,600. 3. Assume that Inder uses IFRS. How would your answers to Requirements 1 and 2 change?
Chapter17: The Management Of Cash And Marketable Securities
Section: Chapter Questions
Problem 2P
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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.
Question
Inder Corporation is experiencing a temporary cash shortage and decides to transfer a group of its accounts receivable to Newton Company on March 22. Inder does not normally transfer its receivables. Newton accepts $110,000 of Inder’s accounts receivable, remits 80% of the accounts receivable transferred, and charges a 16% commission on the gross amount of the transferred receivables. Title to the receivables is transferred to Newton, and Newton has the right to assign, pledge, or sell the receivables. During the period, sales returns and allowances on transferred accounts amounted to $1,000.
| Required: | |
| 1. | Prepare all the |
| 2. | Prepare all the journal entries necessary by Inder to record the preceding information assuming the transfer was with recourse and the recourse obligation had an estimated fair value of $5,600. |
| 3. | Assume that Inder uses IFRS. How would your answers to Requirements 1 and 2 change? |
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