G. Calamia Company manufactures athletic wear for sporting goods stores and frequently sells its receivable to factors as a means of accelerating cash collections. On May 1, 2022, Calamia sold $120,000 of its receivables to Martinez Factoring, Inc. The receivables were sold without recourse. The factor charged 8% and held back 5% for defects in the receivables. Bad debts estimated on the receivables is $500. 1. What is meant by defects in the receivables? What happens if there are fewer defects than anticipated? Or more? 2. Write the journal entry to record the factoring for Calamia. 3. Write the journal entry for Martinez Factoring.
G. Calamia Company manufactures athletic wear for sporting goods stores and frequently sells its receivable to factors as a means of accelerating cash collections. On May 1, 2022, Calamia sold $120,000 of its receivables to Martinez Factoring, Inc. The receivables were sold without recourse. The factor charged 8% and held back 5% for defects in the receivables. Bad debts estimated on the receivables is $500. 1. What is meant by defects in the receivables? What happens if there are fewer defects than anticipated? Or more? 2. Write the journal entry to record the factoring for Calamia. 3. Write the journal entry for Martinez Factoring.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:G. Calamia Company manufactures athletic wear for sporting goods stores and frequently sells
its receivable to factors as a means of accelerating cash collections. On May 1, 2022,
Calamia sold $120,000 of its receivables to Martinez Factoring, Inc. The receivables were
sold without recourse. The factor charged 8% and held back 5% for defects in the
receivables. Bad debts estimated on the receivables is $500.
1. What is meant by defects in the receivables? What happens if there are fewer defects
than anticipated? Or more?
2. Write the journal entry to record the factoring for Calamia.
3. Write the journal entry for Martinez Factoring.
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