On July 1 of the current year, Rio Bravo factored receivables with a carrying value of $250,000 to a local bank. The transfer was made with a recourse of $3000. The bank assesses a finance charge of 3% of the amount of accounts receivable and retains an amount equal to 5% of the accounts receivable (for probable adjustments). The journal entry for this transaction will include which of the following? A. Debit to Recourse Liability of $3,000 B. Debit to Cash of $233,000. C. Debit to Due from Bank of $15,500. D. Debit to Loss on Sale of Receivables of $10,500. E. Mor than one of these.

FINANCIAL ACCOUNTING
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ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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On July 1 of the current year, Rio Bravo factored receivables with a carrying value of $250,000 to a local bank. The transfer was made with a recourse of $3000. The bank assesses a finance charge of 3% of the amount of accounts receivable and retains an amount equal to 5% of the accounts receivable (for probable adjustments). The journal entry for this transaction will include which of the following?

A. Debit to Recourse Liability of $3,000

B. Debit to Cash of $233,000.

C. Debit to Due from Bank of $15,500.

D. Debit to Loss on Sale of Receivables of $10,500.

E. Mor than one of these.

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So is Cash the plug amount? If not, please show how you get to $230K.

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