On April 1, 2020, Super Enterprises sold $750,000 of accounts receivable to Convenience Factors, Inc. on a basis with recourse basis. The recourse obligation has a fair value of $9,000. Super Enterprises will continue to manage the customer accounts, including their collection. Super Enterprises estimates this obligation has a liability value of $12,500. Convenience Factors assesses a finance charge of 4% of the amount of accounts receivable and retains an amount equal to 5% of accounts receivable. Required: a) Åssume Super Enterprises follows ASPE and the control of receivables has been given up to Convenience Factors. Prepare the journal entry required on Super's books on April 1, 2020. b) Assume Super Enterprises follows IFRS, prepare the journal entry required on Super's books on April 1, 2020. (Show all supporting calculations)

On April 1, 2020, Super Enterprises sold $750,000 of accounts receivable to Convenience Factors, Inc. on a basis with recourse basis. The recourse obligation has a fair value of $9,000. Super Enterprises will continue to manage the customer accounts, including their collection. Super Enterprises estimates this obligation has a liability value of $12,500. Convenience Factors assesses a finance charge of 4% of the amount of accounts receivable and retains an amount equal to 5% of accounts receivable. Required: a) Åssume Super Enterprises follows ASPE and the control of receivables has been given up to Convenience Factors. Prepare the journal entry required on Super's books on April 1, 2020. b) Assume Super Enterprises follows IFRS, prepare the journal entry required on Super's books on April 1, 2020. (Show all supporting calculations)

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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Waterway Corporation factors $260,800 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, 2025. 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 a transfer of receivables with recourse to be accounted for as a sale. Prepare the journal entry on August 15, 2025, for Waterway to record the sale of receivables, assuming the recourse obligation has a fair value of $5,000. (If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually. List all debit entries before credit entries.)
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