Exercise 8- 13 Factoring of Accounts receivable without recourse Mesquite Corporation factored $200,000 of accounts...
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Exercise 8- 13 Factoring of Accounts receivable without recourse Mesquite Corporation factored $200,000 of accounts receivable with a bank. The transfer was made without recourse. The bank charges a 5% fee on the transfer. Assume the receivables had a $6,000 allowance for bad debts and that the criteria for sale accounting are met. Prepare the journal entry to record the transfer of the receivables in exchange for cash less the factoring fee.
Exercise 8- 14 Factoring of Accounts receivable with recourse Assume the same facts as General Question/Exercise 8- 13 but that the sale is with recourse and the lender in addition to charging a fee of 3% withholds $12,500 to cover possible late collections and uncollectibles. Also assume the company believes that the fair value of the recourse obligation is $7,000. Prepare the journal entry to record the transfer of the receivables in exchange for cash less the factoring fee.
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