The cash proceeds from the sale of receivables, factoring fees and describe the way in which it would be reported by I Company in its financial statement, and describe its effect on receivable turnover ratio in future.

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Chapter 8, Problem 8.15ME

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To compute: The cash proceeds from the sale of receivables, factoring fees and describe the way in which it would be reported by I Company in its financial statement, and describe its effect on receivable turnover ratio in future.

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Question: Presented below is the information for Skysong Company. Beginning of the year Accounts Receivable balance was $23600. Net sales (all on account) for the year were $103100. Skysong does not offer cash discounts. Collections on accounts receivable during the year were $90300. Skysong is planning to factor some accounts receivables at the end of the year. Accounts totaling $14100 will be transfered to Credit Factors, Inc with recourse. Credit Factor will retain 7% of the balances for probable adjustments and assesses a finance charge of 6%. The fair value of the recourse obligation is $1021. Prepare the journal entry to record the sale of the receivables. Compute Skysongs accounts receivable turnover for the year, assuming the receivables are sold.

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