Problem 3 To raise more liquidity, Randy Corp. factored $70,000 of its accounts receivable with Mock Bank with recourse on 1/1/2018. Mock Bank agreed to collect the accounts receivable after the transaction, assessed a finance charge of 2% of the amount transferred and withheld an amount equal to 3% of the amount to cover probable uncollectible accounts. Randy prepared financial statements under ASPE. Assume the transaction qualified for the sale of receivables treatment. The recourse obligation had a fair value of $3,000. 1. Prepare a journal entry for Randy Corp. for the sale of receivables. 2. Prepare a journal entry for Mock Bank for the purchase of the receivables. 3. In general terms (without preparing a journal entry), describe how Randy Corp. would record the transaction if it followed IFRS.
Problem 3 To raise more liquidity, Randy Corp. factored $70,000 of its accounts receivable with Mock Bank with recourse on 1/1/2018. Mock Bank agreed to collect the accounts receivable after the transaction, assessed a finance charge of 2% of the amount transferred and withheld an amount equal to 3% of the amount to cover probable uncollectible accounts. Randy prepared financial statements under ASPE. Assume the transaction qualified for the sale of receivables treatment. The recourse obligation had a fair value of $3,000. 1. Prepare a journal entry for Randy Corp. for the sale of receivables. 2. Prepare a journal entry for Mock Bank for the purchase of the receivables. 3. In general terms (without preparing a journal entry), describe how Randy Corp. would record the transaction if it followed IFRS.
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter6: Cash And Receivables
Section: Chapter Questions
Problem 15P: Comprehensive Receivables Problem Blackmon Corporations December 31, 2018, balance sheet disclosed...
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