On August 4th Ridge Hill Company sells $700,000 of its accounts receivable to the Cheesecake Factoring Company (CFC). The contractual rights have been transferred to CFC and the company will receive the payments when collected by Ridge Hill. That is, Ridge Hill will still administer the collection of accounts receivable and upon receiving the collection, the company will make payment to CFC. Assume that this transaction meets all three criteria of FASB ASC Topic 860. Below are the relevant information regarding the factoring: • The fee charged for factoring service: $14,000 • Balance retained by CFC: $10,000 Required: 1. Prepare the journal entry to record the transaction assuming that the factoring agreement was without recourse. 2. Prepare the journal entry or entries to record the transaction assuming that the factoring agreement was with recourse. Ridge Hill estimates the recourse obligation at $8,000. 3. Prepare the journal entry to record this agreement assuming that the CFC is not permitted to pledge, assign or sell any of the receivables over the term of the contract.

On August 4th Ridge Hill Company sells $700,000 of its accounts receivable to the Cheesecake Factoring Company (CFC). The contractual rights have been transferred to CFC and the company will receive the payments when collected by Ridge Hill. That is, Ridge Hill will still administer the collection of accounts receivable and upon receiving the collection, the company will make payment to CFC. Assume that this transaction meets all three criteria of FASB ASC Topic 860. Below are the relevant information regarding the factoring: • The fee charged for factoring service: $14,000 • Balance retained by CFC: $10,000 Required: 1. Prepare the journal entry to record the transaction assuming that the factoring agreement was without recourse. 2. Prepare the journal entry or entries to record the transaction assuming that the factoring agreement was with recourse. Ridge Hill estimates the recourse obligation at $8,000. 3. Prepare the journal entry to record this agreement assuming that the CFC is not permitted to pledge, assign or sell any of the receivables over the term of the contract.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

Factors, Inc. remits 90% of the amount factored to Alby and keeps 10% to cover sales returns When Factors, Inc. collects the receivables, it will remit the retained amount less a fee. Accounts receivables factored 30,000 Fair value of amount retained 2, 500 Fee on total factored amount 2% Prepare Alby Corp's journal entry to record the transfer assuming that the sale criteria are met.
Guardians Fund Managers Company sells two licenses to XYZ Company on September 1, 20x6. First in exchange for P400,000, the company provides XYZ with a copy of its proprietary investment management software, which the company does not anticipate updating and which XYZ can permanently use. Second, in exchange for P360,000, the company provides XYZ with a three-year right to market the company’s financial advisory services under the name of Guardians, which the company advertises on an ongoing basis. How much revenue will the company recognize in 20x6 under this arrangement?
es Mountain High Ice Cream Company reports under IFRS. Mountain High transferred $64,000 of accounts receivable to the Prudential Bank. The transfer was made with recourse. Prudential remits 80% of the factored amount to Mountain High and retains 20% to cover sales returns and allowances. When the bank collects the receivables, It will remit to Mountain High the retained amount (which Mountain estimates has a fair value of $5,400). Mountain High anticipates a $3,400 recourse obligation. The bank charges a 1% fee (1% of $64,000), and requires that amount to be paid at the start of the factoring arrangement. Mountain High has transferred control over the receivables, but determines that it still retains substantially all risks and rewards associated with them. Required: Prepare the Journal entry to record the transfer on the books of Mountain High, considering whether the sale criteria under IFRS have been met Note: If no entry is required for a transaction/event, select "No Journal…
On January 1, 2019, Fulton Inc. enters into a contract with Gibson to deliver goods. Gibson pays $100,000 at the time the contract is signed, at which time the goods are transferred and Fulton’s performance obligation is complete. In addition, Gibson agrees to pay Fulton $100,000 on December 31, 2019, and December 31, 2020. If Fulton entered into a financing arrangement with Gibson it would charge an interest rate of 9%. Please assist with the journal entries. Thank you! There are 8 journal entries in all.
Meyer & Smith is a full-service technology company. They provide equipment, installation services as well as training. Customers can purchase any product or service separately or as a bundled package. Sunland Corporation purchased computer equipment, installation and training for a total cost of $ 135405 on March 15, 2021. Estimated standalone fair values of the equipment, installation and training are $ 88500, $ 44400 and $ 26400 respectively. The journal entry to record the transaction on March 15, 2021 will include a O credit to Sales Revenue for $ 135405. O credit to Unearned Service Revenue of $ 22440. O debit to Unearned Service Revenue of $ 26400. O credit to Service Revenue of $ 44400.
Bridgeport Inc. enters into an agreement on March 1, 2020, to sell Werner Metal Company aluminum ingots. As part of the agreement, Bridgeport also agrees to repurchase the ingots on May 1, 2020, at the original sales price of $190,000 plus 3%. (a) Prepare Bridgeport's journal entry necessary on March 1, 2020. (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 ancienter O for the amounts.) Account Titles and Explanation eTextbook and Media List of Accounts Debit Credit
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.)
On May 10, 2025, Cullumber Co. enters into a contract to deliver a product to Oriole Inc. on June 15, 2025. Oriole agrees to pay the full contract price of $1,980 on July 15, 2025. The cost of the goods is $1,280. Cullumber delivers the product to Oriole on June 15, 2025, and receives payment on July 15, 2025. Prepare the journal entries for Cullumber related to this contract. Either party may terminate the contract without compensation until one of the parties performs. (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. Record journal entries in the order presented in the problem.) Date Account Titles and Explanation Debit Credit SI
Logitech Corporation transferred $100,000 of accounts receivable to a local bank. The transfer was made without recourse. The local bank remits 85% of the factored amount to Logitech and retains the remaining 15%. When the bank collects the receivables, it will remit to Logitech the retained amount less a fee equal to 3% of the total amount factored. Logitech estimates a fair value of its 15% interest in the receivables of $11,000 (not including the 3% fee). What is the effect of this transaction on the company’s assets, liabilities, and income before income taxes?
The controller for Concord Corporation has reached an agreement with Riverbed Financing Ltd. to sell a large portion of Concord’s past-due accounts receivable. Concord agrees to sell $1,840,000 of accounts receivable to Riverbed with recourse. Concord’s controller estimates that the fair value of Concord’s liability to pay Riverbed for uncollectible accounts is $165,000. Riverbed will charge Concord 8% of the total receivables balance as a financing fee, and will withhold an initial amount of 9%.Calculate the net proceeds and the gain or loss on the disposal of receivables to Riverbed Financing Ltd. Net proceeds $ ( Loss / Gain ) on disposal of receivables $ Prepare the journal entry on the books of Concord Corporation to record the disposal of receivables to Riverbed Financing Ltd. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the…
Presented below are three independent situations.1. Novak Stamp Company records stamp service revenue and provides for the cost of redemptions in the year stamps are sold to licensees. Novak’s past experience indicates that only 80% of the stamps sold to licensees will be redeemed. Novak’s liability for stamp redemptions was $14,086,200 at December 31, 2019. Additional information for 2020 is as follows. Stamp service revenue from stamps sold to licensees $8,609,200 Cost of redemptions (stamps sold prior to 1/1/20) 5,666,400 If all the stamps sold in 2020 were presented for redemption in 2021, the redemption cost would be $5,420,400. What amount should Novak report as a liability for stamp redemptions at December 31, 2020? Liability for stamp redemptions at December 31, 2020 $ 2. In packages of its products, Splish Inc. includes coupons that may be presented at retail stores to obtain discounts on other Splish products. Retailers are reimbursed for the face…