On January 1, 2014, Floppy enters into an agreement with State Finance Corporati

Question

On January 1, 2014, Floppy enters into an agreement with State Finance Corporation to sell a group of receivables without recourse. The total face value of the receivables is $150,000. State Finance Corp. will charge 12% interest on the weighted-average time to maturity of the receivables of 95 days plus a 2% fee. Prepare the journal entry to record the transfer of the receivables. Do not provide any journal explanations. Round calculations to the nearest dollar. If no entry is necessary, write "no entry."

Explanation / Answer

CASH A/C........................................................DR $142250

INTEREST EXPENSES A/C..............................DR $4750 [($150000 *12%) *95 /360DAYS]

FEES EXPENSES A/C.....................................DR $3000 ($15000 * 2%)

   TO ACCOUNTS RECEIVABLE $150000

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