Factoring Receivables with and without Recourse . Krouse Incorporated sold $1,000,000 of its accounts receivable to Fusilli Factors. Fusilli charges a fee equal to 8% of the receivables factored and holds back an additional 4% as security. Fusilli will return the hold back to Krouse when the receivables are collected. This transaction is to be recorded as a sale. Required a. Prepare the journal entry required to record the sale of receivables assuming that the receivables are factored without recourse b. Independent of your answer to part (a), prepare the journal entry required to record the sale of the receivables assuming that the receivables are factored with recourse. The recourse liability is estimated at 2% of the receivables factored.
Factoring Receivables with and without Recourse . Krouse Incorporated sold $1,000,000 of its accounts receivable to Fusilli Factors. Fusilli charges a fee equal to 8% of the receivables factored and holds back an additional 4% as security. Fusilli will return the hold back to Krouse when the receivables are collected. This transaction is to be recorded as a sale. Required a. Prepare the journal entry required to record the sale of receivables assuming that the receivables are factored without recourse b. Independent of your answer to part (a), prepare the journal entry required to record the sale of the receivables assuming that the receivables are factored with recourse. The recourse liability is estimated at 2% of the receivables factored.
Solution Summary: The author explains factoring without recourse, which is the process of recording the transactions of an organization in a chronological order.
Factoring Receivables with and without Recourse. Krouse Incorporated sold $1,000,000 of its accounts receivable to Fusilli Factors. Fusilli charges a fee equal to 8% of the receivables factored and holds back an additional 4% as security. Fusilli will return the hold back to Krouse when the receivables are collected. This transaction is to be recorded as a sale.
Required
a. Prepare the journal entry required to record the sale of receivables assuming that the receivables are factored without recourse
b. Independent of your answer to part (a), prepare the journal entry required to record the sale of the receivables assuming that the receivables are factored with recourse. The recourse liability is estimated at 2% of the receivables factored.
Definition Definition Method of recording financial transactions in the book of original entry by debiting and crediting the accounts affected by a transaction using the golden rules of accrual accounting.
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