Factoring of
IFRS
• LO7–8, LO7–10
This is a variation of E 7–20 modified to focus on factoring with recourse under IFRS.] Mountain High Ice Cream Company reports under IFRS. Mountain High 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 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. Mountain High has transferred control over the receivables, but determines that it still retains substantially all risks and rewards associated with them.
Required:
Prepare the
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ACNT 1371 PRINT UPGRADE
- Problem 4 MXC Company is a retailer. Its entered into a continuing agreement with SHN Financing Corporation to factor its accounts receivable to the latter. They agreed on the following: Credit terms is 5/10, n/30 5% commission to SHN based on the gross amount of the accounts receivable 20% of the gross uncollected accounts receivable will be withheld by SHN Returns by customers will be honored During April 2020, the following transactions took place relating to said agreement: April 14 MXC sold goods on account to NVG Company, P300,000 and accounts were immediately factored by SHN. April 16 MXC sold goods on account to MXG Company, P200,000 and accounts were immediately factored by SHN. April 18 NVG returned goods amounting to P20,000. April 20 NVG paid in full. April 25 MXC sold goods on account to AFN Company, P600,000 and accounts were immediately factored by SHN. April 26 AFN paid in full. Prepare the journal entries and compute the balance of the account Receivable from…arrow_forwardRequired information Problem 8-2B Record notes payable and notes receivable (LO8-2) [The following information applies to the questions displayed below.] Eskimo Joe's, designer of the world's second best-selling T-shirt (just behind Hard Rock Cafe), borrows $20.3 million cash on November 1, 2021. Eskimo Joe's signs a six-month, 9% promissory note to Stillwater National Bank under a prearranged short-term line of credit. Interest on the note is payable at maturity. Each firm has a December 31 year-end. Problem 8-2B Part 3 3. Prepare the journal entry on April 30, 2022, to record payment of the notes payable at maturity. (Do not round intermediate calculations. If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field. Enter your answers in dollars, not in millions. For example, $5.5 million should be entered as 5,500,000.) View transaction list View journal entry worksheet No Date General Journal Debit Credit April 30, 2022 Interest…arrow_forwardExercise 7-18 (Algo) Notes receivable [LO7-7] On June 30, 2021, the Esquire Company sold some merchandise to a customer for $54,000. In payment, Esquire agreed to accept a 7% note requiring the payment of interest and principal on March 31, 2022. The 7% rate is appropriate in this situation. Required: 1. Prepare journal entries to record the sale of merchandise (omit any entry that might be required for the cost of the goods sold), the December 31, 2021 interest accrual, and the March 31, 2022 collection. (Do not round intermediate calculations.) 2. If the December 31 adjusting entry for the interest accrual is not prepared, by how much will income before income taxes be over-or understated in 2021 and 2022? X Answer is not complete. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Prepare journal entries to record the sale of merchandise (omit any entry that might be required for the cost of the goods sold), the December 31, 2021 interest…arrow_forward
- TB Problem 7-170 (Algo) Cordova, Incorporated, reported the following... Cordova, Incorporated, reported the following receivables in its December 31, 2023, year-end balance sheet: Current assets: Accounts receivable, net of $50,000 in allowance for uncollectible accounts Interest receivable Notes receivable Additional information: 1. The notes receivable account consists of two notes, a $100,000 note and a $280,000 note. The $100,000 note is dated October 31, 2023, with principal and interest payable on October 31, 2024. The $280,000 note is dated March 31, 2023, with principal and 8% interest payable on March 31, 2024. 2. During 2024, sales revenue totaled $2,100,000, $1,960,000 cash was collected from customers, and $39,000 in accounts receivable were written off. All sales are made on a credit basis. Bad debt expense is recorded at year-end by adjusting the allowance account to an amount equal to 8% of year-end gross accounts receivable. Required: 1. In addition to sales revenue,…arrow_forwardS Word Problem 7-35 (Algo) [LU 7-2 (2)] On March 16, Jangles Corporation received a $20,500 invoice dated March 13. Cash discount terms were 3/10, n/30. On March 20, Jangles sent an $8,200 partial payment. a. What credit should Jangles receive? (Round your answer to the nearest cent.) Credit b. What is Jangles' outstanding balance? (Round your answer to the nearest cent.) Outstanding balance Check my workarrow_forwardProblem 4-10 (AICPA Adapted) Rapture Company had the following information for eurrent year relating to accounta receivable: 13000 50000 4.750.000 125.000 Accounts receivable, January 1 Credit eales Collectiona from customers, excluding recovery Accounta written off Collection of accounta written off in prior year. customer credit waa not reestablished Eatimated uncollectible receivables per aging at December 31 25.000 165 000 What is the balance of accounta receivable, before allowane for doubtful accounts, on December 317 a. 1,825,000 b. 1,850,000 c. 1,950,000 d. 1,990,000arrow_forward
- Problem 7-12 (Algo) Accounts and notes receivable; discounting a note receivable; receivables turnover ratio financial statement effects [LO7-5, 7-6, 7-7, 7-8, 7-9] Chamberlain Enterprises incorporated reported the following receivables in its December 31, 2024, year-end balance sheet: Current assets: accounts Accounts receivable, net of $37,000 in allowance for uncollectible $ 283,000 11,050 390,000 Interest receivable Notes receivable Additional Information: 1. The notes receivable account consists of two notes, a $65,000 note and a $325,000 note. The $65,000 note is dated October 31, 2024, with principal and interest payable on October 31, 2025. The $325,000 note is dated June 30, 2024, with principal and 6% Interest payable on June 30, 2025. 2. During 2025, sales revenue totaled $1,470,000, $1,345,000 cash was collected from customers, and $35,000 in accounts receivable were written off. All sales are made on a credit basis. Bad debt expense is recorded at year-end by adjusting the…arrow_forwardPROBLEM 1 Aljon Company reported the following as of December 31, 2021: Accounts receivables P100,000 Notes receivables 80,000 Allowance for doubtful accounts Installment receivables (normally receivable within 1 to 3 years) Customer's credit balances 27,000 150,000 20,000 Supplier's debit balances Advances to subsidiaries 10,000 35.000 Advances to suppliers 30.000 Advances to affiliates 40.000 Security deposit 85.000 Subscriptions receivable 22.000 How much is the total trade receivables as of December 31, 2021?arrow_forwardGLO701 - Based on Problem 7-5A LO C2, C3, P4 The following selected transactions are from Turner Company. Year 1 Accepted a $22,800, 60-day, 10% note in granting Than Nguyen a time extension on his past-due account receivable. Made an adjusting entry to record the accrued interest on the Nguyen note. Dec. 16 31 Year 2 Received Nguyen's payment of principal and interest on the note dated December 16. Accepted a $8,000, 10%, 90-day note in granting a time extension on the past-due account receivable from Lee Feb. 14 Mar. Co. 17 Accepted a $15,600, 30-day, 7% note in granting Spencer Lauer a time extension on her past-due account receivable. Lauer dishonored her note. Lee Co. dishonored its note. Apr. 16 May 31 Accepted a $22,000, 90-day, 6% note in granting a time extension on the past-due account receivable of Perez Co. Aug. Accepted a $12,600, 60-day, 10% note in granting Kay Wright a time extension on his past-due account receivable. Received payment of principal plus interest from…arrow_forward
- Problem 2 On September 1, 2020, Rayhak Company assigned specific receivables totaling to P750,000 toPak Bank as a collateral on a P625,000, 12% loan. Pak Bank will collect the assigned accountsreceivable. The bank also assessed a 2% service charge on the total accounts receivableassigned. Collections of assigned accounts during September 2020 totaled P260,000 gross ofcash discounts amounting to P3,500. Prepare all the journal entries relating to the problem for themonth of September 2020. (Books of Rayhak)arrow_forward8:15 ull 4G O AA Not Secure – moodle.kent.edu.au BE9-3 During its first year of operations, Gavin Company had credit sales of $3,000,000; $600,000 remained uncollected at year-end. The credit manager estimates that $31,000 of these receivables will become uncollectible. (a) Prepare the journal entry to record the estimated uncollectibles. (b) Prepare the current assets section of the balance sheet for Gavin Company. Assume that in addition to the receivables it has cash of $90,000, inventory of $130,000, and prepaid insurance of $7,500. BE9-4 At the end of 2017, Carpenter Co. has accounts receivable of $700,000 and an allowance for doubtful accounts of $54,000. On January 24, 2018, the company learns that its receivable from Megan Gray is not collectible, and management authorizes a write-off of $6,200. (a) Prepare the journal entry to record the write-off. (b) What is the cash realizable value of the accounts receivable (1) before the write-off and (2) after the write-off? BE9-7…arrow_forwardProblem 8-6 (ACP) Bleak Company provided the following information: Dec. 1 Assigned P1,500,000 of accounts receivable to a bank on a nonnotification basis in consideration for a loan. The bank advanced P1,300,000 less a service charge of P50,000. The entity signed a promissory note bearing interest of 1% per month on the unpaid loan balance. 31 Collected assigned accounts of P1,000,000 less sales discount of P30,000. 31 Remitted the collection to the bank in payment first for the interest and the balance to the principal. Required: a. Prepare journal entries to record the transactions. b. Indicate the classification and disclosure of the accounts related to the assignment on December 31.arrow_forward