Factoring of
• LO7–8
[This is a variation of E 7–19 modified to focus on factoring with recourse.]
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
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INT. ACCOUNTING<CUSTOM>W/CONNECT 2-YEA
- Prepare all necessary entries in general journal form for Garfield Corp. E7.13 (LO 4) (Note Transactions at Unrealistic Interest Rates) On July 1, 2020, Agincourt Inc. made two sales. 1. It sold land having a fair value of $700,000 in exchange for a 4-year zero-interest-bearing promissory note in the face amount of $1,101,460. The land is carried on Agincourt’s books at a cost of $590,000. 2. It rendered services in exchange for a 3%, 8-year promissory note having a face value of $400,000 (interest payable annually). Agincourt Inc. recently had to pay 8% interest for money that it borrowed from British National Bank. The customers in these two transactions have credit ratings that require them to borrow money at 12% interest. Instructions Record the two journal entries that should be recorded by Agincourt Inc. for the sales transactions above that took place on July 1, 2020.arrow_forward20. Problem Solving. ABC has an accounts receivable with a gross amount of P150,000 and 2% allowance to be doubtful. ABC sold this account to nC20 Finance Inc for 95% of the carrying value of accounts receivable under a casual agreement. nC20 also charges a factoring fee and commission of 2% of the carrying value. Determine the amount to be recognized as loss from factoring. Round off final answer to the nearest peso.arrow_forwardE9.8 (LO 2), AP On December 31, 2021, when its Allowance for Doubtful Accounts had a zero balance, Ling Co. estimated that 2% of its net accounts receivable of $450,000 will become uncollectible and records the necessary adjustment to Allowance for Doubtful Accounts. On May 11, 2022, Ling Co. determined that the Jeff Shoemaker account was uncollectible and wrote off $1,100. On June 12, 2022, Shoemaker paid the amount previously written off. Instructions A. Prepare the journal entries on December 31, 2021, May 11, 2022, and June 12, 2022. Journalize entries for the sale of accounts receivable.arrow_forward
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- 45.Ping Company finances some of its current operations by factoring its accounts receivable to a finance company. On July 1, 2021, the company factored P2,000,000 of its accounts receivable to Atlas Finance Company. Purchase price was 85% of the receivables factored. Atlas withheld 5% of the purchase price as protection against sales returns and allowances.Sales returns recorded by Ping on the factored accounts receivable totaled P30,000; the balance of the factor’s holdback was settled by the finance company on August 31, 2021.What was the total cash received by Ping Company from this factored accounts after full settlement by the factor?arrow_forwardE6.14 (LO 5) (Gift Card Sales and Redemptions) During December 2023, Soft Skin Ltd. sells $20,000 of gift cards to customers. From reliable past experience, management estimates that 8% of the gift cards sold will not be redeemed by customers. In January 2024, $2,000 of these cards is redeemed for merchandise with a cost of $1,500. In February 2024, a further $10,000 of these cards is redeemed for merchandise with a cost of $8,000. The company uses a perpetual inventory system and has a February 28 year end Instructions Prepare the journal entry needed for December 2023. Prepare the journal entry needed for the January 2024 redemptions. Round to the nearest dollar. Prepare the journal entry needed for the February 2024 redemptions. Round to the nearest dollar. What amount, if any, will appear on the SFP concerning gift cards at February 28, 2024? Note:- Do not provide handwritten…arrow_forward9. On Oct 1, 20X1 ABC Co. discounted a one year 12% P600,000 note received from a customer on January 1, 20X1 with a bank at 14% on a without recourse basis. How much is the loss on discounting? 4,690 4,960 5,250 5,520arrow_forward
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