Blue Enterprises sold $788,000 of accounts receivable to Crane Factors, Inc. on a without recourse basis under IFRS, as the risks and rewards have been transferred to Crane. The transaction meets the criteria for a sale, and no asset or liability components of the receivables are retained by Blue. Crane Factors assesses a finance charge of 4% of the amount of accounts receivable and retains an amount equal to 5% of accounts receivable. Prepare journal entries for both Blue and Crane. Use the account Due to Customer for Crane. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry for the account titles and enter o for the amounts. List all debit entries before credit entries.)

Blue Enterprises sold $788,000 of accounts receivable to Crane Factors, Inc. on a without recourse basis under IFRS, as the risks and rewards have been transferred to Crane. The transaction meets the criteria for a sale, and no asset or liability components of the receivables are retained by Blue. Crane Factors assesses a finance charge of 4% of the amount of accounts receivable and retains an amount equal to 5% of accounts receivable. Prepare journal entries for both Blue and Crane. Use the account Due to Customer for Crane. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry for the account titles and enter o for the amounts. List all debit entries before credit entries.)

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Furman Corporation entered into an assignment agreement with a finance company whereby Furman would be advanced 80% of all accounts assigned, minus a $2,000 service charge. The assignment does not meet the conditions for a sale and should be accounted for as a secured borrowing. During the year, $300,000 of accounts receivable were assigned, $220,000 collections were made on outstanding assigned accounts, and $210,000 was remitted to the finance company. This remittance included interest charges of $2,100. Sales returns and allowances on assigned accounts amounted to $5,000. Required: 1. Prepare the journal entries necessary to record the preceding information. 2. Show how the preceding information would be reported on Furman’s year-end balance sheet (assume the note payable is short-term).
Libby Inc. sold $500,000 of accounts receivable to Reliable Finance on a with recourse basis. Reliable Finance assesses a 4.5% finance charge on the amount of accounts receivable and retains an amount equal to 7% of accounts receivable for possible adjustments. Prepare the journal entries for Libby Incorporated and Reliable Finance to record the sale of the accounts receivable to Reliable Finance assuming that the recourse liability has a fair value of $16,000.
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