The controller for Bramble Corporation has reached an agreement with Sheffield Financing Ltd. to sell a large portion of Bramble'spast-due accounts receivable. Bramble agrees to sell $1,820,000 of accounts receivable to Sheffield with recourse. Bramble's controllerestimates that the fair value of Bramble's liability to pay Sheffield for uncollectible accounts is $163.000. Sheffield will charge Bramble9% of the total receivables balance as a financing fee, and will withhold an initial amount of 10%(a)Calculate the net proceeds and the gain or loss on the disposal of receivables to Sheffield Financing Ltd.Net proceeds✓on disposal of receivablesS$

Factoring with recourse is a method where a company sells its receivable to the finance agency or…

Answered: The controller for Bramble Corporation…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

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Problem 1Q

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On 1 July 2019, Cassblanka Ltd sells a construction vehicle to Tradon Ltd. The vehicle cost Cassblanka Ltd $19,500. Rather than selling the item for a cash price or a short-term claim for cash of $22,500, Cassblanka Ltd accepts a promissory note that requires Tradon Ltd to make five annual payments of $5,000 each, the first one to be made on 30 June 2020. The difference between the gross receipts and the current sales price represents interest revenue to be earned by Cassblanka Ltd over the period of the note. The implicit interest in the arrangement is 10 per cent. Required: Provide the necessary journal entries for Cassblanka Ltd for the year ended 30 June 2020 and 30 June 2021 to record the selling of construction vehicle.
Chato Company sells electrical goods covered by a one – year warranty for any defects. Of the salesof P70,000,000 for the year, the entity estimated that 3% will have major defects, 5% will have aminor defect and 92% will have no defect. The cost of repairs would be P5,000,000 if all theproducts sold had major defect and P3,000,000 if all had minor defect.What amount should be recognized as a warranty provision?
Vision Importing Company engaged in the following transactions involving promissory notes: Jul 2 Sold engines to morgan company for $180,000 to exchange for a 90-day, 12 percent promissory note. July 15 Sold engines to level company for $96,000 in exchange for a 90-day, 14 percent note. July 30 sold engines to level company for $90,000 in exchange for a 90-day, 11 percent note. Required: For each of the notes, determine the (a) maturity date, (b) interest on the note, and (c) maturity value. (Round to the nearest cent.) Assume that the fiscal year for Vision Importing ends on August 31. How much interest income should be recorded on that date? (Round to the nearest cent.)
Bramble Corp. factors $630,000 of accounts receivable with Marin Inc., Inc. on a with recourse basis. Marin Inc. will collect the receivables. The receivable records are transferred to Marin Inc. on August 15, 2020. Marin Inc. assesses a finance charge of 3.0% of the amount of accounts receivable and also reserves an amount equal to 5.40% of accounts receivable to cover probable adjustments. Bramble prepares financial statements under ASPE. Assume the conditions for to be recorded as a sale are met. Prepare the journal entry on August 15, 2020, for Bramble to record the sale of receivables, assuming the recourse obligation has a fair value of $5,900
White Corporation has entered into an agreement to transfer accounts receivable to Murphy Company. Under the terms of this agreement, White receives 80% of the value of all the transferred accounts receivable (to reflect credit risk) and is charged a 1% service charge, which is based upon the dollar amount of transferred receivables. Interest is charged at an annual interest rate of 12% of any outstanding loan balance. The transferred receivables will continue to be collected by White with any cash flows being remitted to Murphy at the end of each month. White is not allowed to transfer the receivables to anyone else. White normally transfers its accounts receivable. The following selected 2019 transactions relate to this agreement: Dec 1 Accounts receivable of $160,000 are transferred. 11 A sales return of $1,000 on a transferred account is made. 31 Collections are made on $82,000 of the transferred accounts receivable plus interest for the month of December. This amount is…
Pearl Woodcrafters sells $227,500 of receivables to Commercial Factors, Inc. on a with recourse basis. Commercial assesses a finance charge of 6% and retains an amount equal to 5% of accounts receivable. Pearl estimates that the recourse liability has a fair value of $4,695 instead of $9,390 estimated earlier. Prepare the journal entry for Pearl to record the sale. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.) Account Titles and Explanation Debit Credit What are the effects of this change in the value of the recourse liability on Pearl's financial statements? Pearl's income will be * by $ Pearl's will be * by $
5. Packwood, Inc. factors $250,000 of its accounts receivable to M&B Finance with recourse. M&B charges a fee of 1% and withholds 10% of the face amount of the receivables to cover possible uncollectible accounts and sales returns. The bank deducts the fee from the cash given to Packwood at the outset of the arrangement. Packwood estimates the fair value of the recourse obligation is equal to $6,000. Packwood estimates the fair value of the 10% of the face amount of receivables equals $22,500. Packwood does not retain control over the factored receivables. Prepare any journal entries Packwood, Inc. would make to record the factoring.
Sheldon factored $200,000 of accounts receivable with Penny Factors on a with recourse basis. Penny assesses a 5% finance charge. Sheldon estimates the fair value of the recourse obligation to be $1,500. Penny Factors pays Sheldon 90% of the factored receivables. Sheldon estimates that the value of the final 10% of receivables is $16,000. Journalize the sale of the receivables.
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