Presented below is information for Sarasota Company. 1. Beginning-of-the-year Accounts Receivable balance was $21.400. 2. Net sales (all on account) for the year were $103.800. Sarasota does not offer cash discounts. Collections on accounts receivable during the year were $84,800. 3. Sarasota is planning to factor some accounts receivable at the end of the year. Accounts totaling $12.800 will be transferred to Credit Factors, Inc. with recourse. Credit Factors will retain 6% of the balances for probable adjustments and assesses a finance charge of 5% The fair value of the recourse obligation is $1,101. (a) Your answer is partially correct.
Presented below is information for Sarasota Company. 1. Beginning-of-the-year Accounts Receivable balance was $21.400. 2. Net sales (all on account) for the year were $103.800. Sarasota does not offer cash discounts. Collections on accounts receivable during the year were $84,800. 3. Sarasota is planning to factor some accounts receivable at the end of the year. Accounts totaling $12.800 will be transferred to Credit Factors, Inc. with recourse. Credit Factors will retain 6% of the balances for probable adjustments and assesses a finance charge of 5% The fair value of the recourse obligation is $1,101. (a) Your answer is partially correct.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
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Presented below is information for Sarasota Company.
1.
Beginning-of-the-year Accounts Receivable balance was $21.400.
2.
Net sales (all on account) for the year were $103.800. Sarasota does not offer cash discounts.
Collections on accounts receivable during the year were $84,800.
3.
Sarasota is planning to factor some accounts receivable at the end of the year. Accounts totaling $12.800 will be transferred to Credit
Factors, Inc. with recourse. Credit Factors will retain 6% of the balances for probable adjustments and assesses a finance charge of 5%
The fair value of the recourse obligation is $1,101.
(a)
Your answer is partially correct.
Prepare the journal entry to record the sale of the receivables. (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)
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