Sale of Receivables Hunt Incorporated sold $300,000 of accounts receivable to Gannon Factors Inc. on a with recourse basis. Gannon assesses a 2% finance charge of the amount of accounts receivable and retains an amount equal to 6% of accounts receivable for possible adjustments. Hunt estimates a recourse liability to cover bad debts of $15,000. Subsequently, the factor collected $283,000 in cash from the accounts receivable Required: Part A: Prepare the journal entry for Hunt to record the sale of the receivables to Gannon. hint: you may or may not need all the debits and credits) 1 2 3 4 5 6 7 8 Ref Account Titles Adjusting Entries Debit Credit 1 2 13 4 5 6 7 8 Chart of Accounts Cash Due from Factor Loss on Sale Gain on Sale Accounts receivable Allowance for bad debts Recourse liability Interest revenue
Sale of Receivables Hunt Incorporated sold $300,000 of accounts receivable to Gannon Factors Inc. on a with recourse basis. Gannon assesses a 2% finance charge of the amount of accounts receivable and retains an amount equal to 6% of accounts receivable for possible adjustments. Hunt estimates a recourse liability to cover bad debts of $15,000. Subsequently, the factor collected $283,000 in cash from the accounts receivable Required: Part A: Prepare the journal entry for Hunt to record the sale of the receivables to Gannon. hint: you may or may not need all the debits and credits) 1 2 3 4 5 6 7 8 Ref Account Titles Adjusting Entries Debit Credit 1 2 13 4 5 6 7 8 Chart of Accounts Cash Due from Factor Loss on Sale Gain on Sale Accounts receivable Allowance for bad debts Recourse liability Interest revenue
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Concept explainers
Bad Debts
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.
Question
Transcribed Image Text:Sale of Receivables
Hunt Incorporated sold $300,000 of accounts receivable to Gannon Factors Inc. on a with
recourse basis. Gannon assesses a 2% finance charge of the amount of accounts receivable and
retains an amount equal to 6% of accounts receivable for possible adjustments. Hunt estimates a
recourse liability to cover bad debts of $15,000.
Subsequently, the factor collected $283,000 in cash from the accounts receivable
Required: Part A: Prepare the journal entry for Hunt to record the sale of the receivables to Gannon.
(hint: you may or may not need all the debits and credits)
1
31
41
5
6
8
Ref
Account Titles
Adjusting Entries
Debit
Credit
1
2
3
14
5
6
8
la
Chart of Accounts
Cash
Due from Factor
Loss on Sale
Gain on Sale
Accounts receivable
Allowance for bad debts
Recourse liability
Interest revenue
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