2. Assuming that the conditions for treatment as a sale are met, prepare Samson's journal entry to record the factoring of $400,000 of receivables. Assume that the fair value of the last 10% of Samson's receivables is equal to $25,000.
2. Assuming that the conditions for treatment as a sale are met, prepare Samson's journal entry to record the factoring of $400,000 of receivables. Assume that the fair value of the last 10% of Samson's receivables is equal to $25,000.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
100%
![Research Case 7-9 (Static) Locate and extract relevant information and authoritative support for a
financial reporting issue; financing with receivables [LO7-8]
You are spending the summer working for a local wholesale furniture company, Samson Furniture, Inc. The company is considering a
proposal from a local financial institution, Old Reliant Financial, to factor Samson's receivables. The company controller is unfamiliar
with the prevailing GAAP that deals with accounting for the transfer of financial assets and has asked you to do some research. The
controller wants to make sure the arrangement with the financial institution is structured in such a way as to allow the factoring to be
accounted for as a sale.
Old Reliant has offered to factor all of the company's receivables on a "without recourse" basis. Old Reliant will remit to Samson 90%
of the factored amount, collect the receivables from Samson's customers, and retain the remaining 10% until all of the receivables have
been collected. When Old Reliant collects all of the receivables, it will remit to Samson the retained amount, less a 4% fee (4% of the
total factored amount).
Required:
1. Access the relevant authoritative literature on accounting for the transfer of financial assets using the FASB Accounting Standards
Codification. You might gain access at the FASB website (www.fasb.org), from your school library, or some other source. This source
will specify what conditions must be met for a transfer of receivables to be accounted for as a sale (or in accounting terms,
"derecognized").
2. Assuming that the conditions for treatment as a sale are met, prepare Samson's journal entry to record the factoring of $400,000 of
receivables. Assume that the fair value of the last 10% of Samson's receivables is equal to $25,000.
3-a. An agreement that both entitles and obligates the transferor, Samson, to repurchase or redeem transferred assets from the
transferee, Old Reliant, maintains the transferor's effective control over those assets and the transfer is accounted for as a secured
borrowing, not a sale, if and only if what conditions are met?
3-b. What is the specific Codification citation that Samson would rely on in applying that accounting treatment?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F3e1bfd6a-3cb6-4031-858f-4ba8da8545b1%2F6e702b4c-5dcf-4171-a850-c3d8eed0b3da%2F6cp6ou9_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Research Case 7-9 (Static) Locate and extract relevant information and authoritative support for a
financial reporting issue; financing with receivables [LO7-8]
You are spending the summer working for a local wholesale furniture company, Samson Furniture, Inc. The company is considering a
proposal from a local financial institution, Old Reliant Financial, to factor Samson's receivables. The company controller is unfamiliar
with the prevailing GAAP that deals with accounting for the transfer of financial assets and has asked you to do some research. The
controller wants to make sure the arrangement with the financial institution is structured in such a way as to allow the factoring to be
accounted for as a sale.
Old Reliant has offered to factor all of the company's receivables on a "without recourse" basis. Old Reliant will remit to Samson 90%
of the factored amount, collect the receivables from Samson's customers, and retain the remaining 10% until all of the receivables have
been collected. When Old Reliant collects all of the receivables, it will remit to Samson the retained amount, less a 4% fee (4% of the
total factored amount).
Required:
1. Access the relevant authoritative literature on accounting for the transfer of financial assets using the FASB Accounting Standards
Codification. You might gain access at the FASB website (www.fasb.org), from your school library, or some other source. This source
will specify what conditions must be met for a transfer of receivables to be accounted for as a sale (or in accounting terms,
"derecognized").
2. Assuming that the conditions for treatment as a sale are met, prepare Samson's journal entry to record the factoring of $400,000 of
receivables. Assume that the fair value of the last 10% of Samson's receivables is equal to $25,000.
3-a. An agreement that both entitles and obligates the transferor, Samson, to repurchase or redeem transferred assets from the
transferee, Old Reliant, maintains the transferor's effective control over those assets and the transfer is accounted for as a secured
borrowing, not a sale, if and only if what conditions are met?
3-b. What is the specific Codification citation that Samson would rely on in applying that accounting treatment?
Transcribed Image Text:WIII speciTY wnat conaitions must pe met Tor a transter of receivapies to pe accountea for as a saie (or in accounting termS,
"derecognized").
2. Assuming that the conditions for treatment as a sale are met, prepare Samson's journal entry to record the factoring of $400,000 of
receivables. Assume that the fair value of the last 10% of Samson's receivables is equal to $25,000.
3-a. An agreement that both entitles and obligates the transferor, Samson, to repurchase or redeem transferred assets from the
transferee, Old Reliant, maintains the transferor's effective control over those assets and the transfer is accounted for as a secured
borrowing, not a sale, if and only if what conditions are met?
3-b. What is the specific Codification citation that Samson would rely on in applying that accounting treatment?
X Answer is not complete.
Complete this question by entering your answers in the tabs below.
Req 1
Req 2
Req 3A
Req 3B
Assuming that the conditions for treatment as a sale are met, prepare Samson's journal entry to record the factoring of
$400,000 of receivables. Assume that the fair value of the last 10% of Samson's receivables is equal to $25,000. (If no
entry is required for a transaction/event, select "No journal entry required" in the first account field.)
No
Transaction
Account Title
Debit
Credit
1
Cash
400,000 X
Loss on sale of receivables
25,000 X
Receivable from factor
7,000
Accounts receivable
400,000
< Req 1
Req 3A >
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