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Intermediate Accounting: Reporting...

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

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BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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Generating Cash from Receivables Guide Company requires additional cash for its business. Guide has decided to use its accounts receivable to raise the additional cash as follows:

  1. 1. On June 30, 2019, Guide assigned $200,000 of accounts receivable to Cell Finance Company. Guide received an advance from Cell of 85% of the assigned accounts receivable, minus a commission on the advance of 3%. Prior to December 31, 2019, Guide collected $150,000 on the assigned accounts receivable and remitted $160,000 to Cell, $10,000 of which represented interese on the advance from Cell.
  2. 2. On December 1, 2019, Guide sold $300,000 of accounts receivable to Factoring Company and received 80% of the value of the factored receivables. Factoring Company charged a 15% commission based on the amount of the factored receivables. The receivables were sold without recourse.

Required:

Prepare a schedule showing the expenses reported on the income statement for the year ended December 31, 2019, as a result of the preceding facts. Show all supporting computations.

To determine

Prepare a schedule that shows expenses reported on the income statement for the year ended December 31, 2019.

Explanation

Income statement:

The financial statement which reports revenues and expenses from business operations and the result of those operations as net income or net loss for a particular time period is referred to as income statement.

Prepare a schedule that shows expenses reported on the income statement for the year ended December 31, 2019.

Company G
Income  statement  Effect
For the year ended December 31, 2019
ParticularsAmount in  $
Expenses resulting from accounts receivable assigned (1)15,100
Expenses resulting from accounts receivable sold45,000
Total expenses60,100

(Table 1)

Therefore, the amount of total expenses that will be reported on the income statement for the year ended December 31, 2019 is $60,100...

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