Beyoncé Corporation factors $268,800 of accounts receivable with Kathleen Battle
ID: 2449324 • Letter: B
Question
Beyoncé Corporation factors $268,800 of accounts receivable with Kathleen Battle Financing, Inc. on a with recourse basis. Kathleen Battle Financing will collect the receivables. The receivables records are transferred to Kathleen Battle Financing on August 15, 2014. Kathleen Battle Financing assesses a finance charge of 2% of the amount of accounts receivable and also reserves an amount equal to 4% of accounts receivable to cover probable adjustments.
(b)
Assume that the conditions are met for the transfer of receivables with recourse to be accounted for as a sale. Prepare the journal entry on August 15, 2014, for Beyoncé to record the sale of receivables, assuming the recourse liability has a fair value of $4,650. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.)
Date
Account Titles and Explanation
Debit
Credit
Show List of Accounts
Date
Account Titles and Explanation
Debit
Credit
August 15, 2014Explanation / Answer
Beyonce Corporation Particulars Amt $ 1 Accounts receivable 268,800 2 Finance Charge @2% of AR 5,376 3 Recourse Liability(fair value) 4,650 4 Loss on sale of receivables=2+3 10,026 5 Retention amount @4% of AR 10,752 6 Cash Received from Factor 252,672 Date Journal Entry Dr $ Cr $ Aug 15.2014. Cash 252,672 Due from Factor 10,752 Loss on sale of Receivables 10,026 Recourse Liability 4,650 Accounts Receivable 268,800 Total 273,450 273,450
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