Marigold Incorporated sold $295,000 of accounts receivable to Gannon Factors Inc. on a with recourse basis. Gannon assesses a 2% finance charge of the amount of accounts receivable and retains an amount equal to 6% of accounts receivable for possible adjustments. Prepare the journal entries for Marigold Incorporated and Gannon Factors to record the sale of the accounts receivable to Gannon assuming that the recourse liability has a fair value of $13,500

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15-04-2020
Business

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Marigold Incorporated sold $295,000 of accounts receivable to Gannon Factors Inc. on a with recourse basis. Gannon assesses a 2% finance charge of the amount of accounts receivable and retains an amount equal to 6% of accounts receivable for possible adjustments. Prepare the journal entries for Marigold Incorporated and Gannon Factors to record the sale of the accounts receivable to Gannon assuming that the recourse liability has a fair value of $13,500

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abiolataiwo2015 abiolataiwo2015 · Answer 1 · 2020-04-17T03:31:38+02:00

Answer:

Dr Cash $257,900

Dr Due from Gannon Factors $17,700

Dr Loss on Sale of Receivables $19,400

Cr Accounts Receivable $295,000

Cr Recourse Liability $13,500

Dr Accounts Receivables $295,000

Cr Due to Customer $17,700

Cr Interest Revenue $5,900

Cr Cash $257,900

Explanation:

Journal entries

Dr Cash $257,900

Dr Due from Gannon Factors $17,700

Dr Loss on Sale of Receivables $19,400

Cr Accounts Receivable $295,000

Cr Recourse Liability $13,500

Dr Accounts Receivables $295,000

Cr Due to Customer $17,700

Cr Interest Revenue $5,900

Cr Cash $257,900

*6% X $295,000 =$17,700

*2% X $295,000 =$5,900 +$13,500=$19,400

akindeleot akindeleot · Answer 2 · 2020-04-17T04:27:09+02:00

Answer:

Accounts Receivable = $295,000

Retention % = 6%

Retention Amount = $295,000 x 6% = $17,700 ( Due from Gannon Factors)

Finance Charge % = 2%

Finance Charge = $295,000 x 2% = $5,900

Loss on Sale of Accounts receivables = Finance Charge + Recourse Liability

=$5,900 + $13,500

=$19,400

Cash received = Total Accounts Receivable Transferred – [Retention Amount + Finance Charge]

Cash received =$295,000 - [$17,700 + $5,900]

=$295,000 - $23,600

=$271,400