You sold $300,000 of accounts receivable to Friendly Factors Inc. on a with recourse basis. Friendly assesses a 2% finance charge of the amount of accounts receivable and retains an amount equal to 6% of accounts receivable for possible adjustments. You estimate that future uncollectible accounts total $15,000 1) How much cash will you receive as a result of the sale? 2) How much is the gain or loss on the sale? (indicate gain or loss) 3) The journal entry to record this sale should include which of the following? a) $18,000 DR to Due from Factor; b) $315,000 CR to accounts receivable; c) $ 15,000 DR to Recourse Obligation
You sold $300,000 of accounts receivable to Friendly Factors Inc. on a with recourse basis. Friendly assesses a 2% finance charge of the amount of accounts receivable and retains an amount equal to 6% of accounts receivable for possible adjustments. You estimate that future uncollectible accounts total $15,000 1) How much cash will you receive as a result of the sale? 2) How much is the gain or loss on the sale? (indicate gain or loss) 3) The journal entry to record this sale should include which of the following? a) $18,000 DR to Due from Factor; b) $315,000 CR to accounts receivable; c) $ 15,000 DR to Recourse Obligation
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:You sold $300,000 of accounts receivable to Friendly Factors Inc. on a with recourse basis. Friendly assesses a 2% finance
charge of the amount of accounts receivable and retains an amount equal to 6% of accounts receivable for possible
adjustments. You estimate that future uncollectible accounts total $15,000 1) How much cash will you receive as a result
of the sale? 2) How much is the gain or loss on the sale? (indicate gain or loss) 3) The journal entry to record this sale
should include which of the following? a) $18,000 DR to Due from Factor; b) $315,000 CR to accounts receivable; c) $
15,000 DR to Recourse Obligation
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