In 2020, Ibran Corp. required additional cash for its business.Management decided to use accounts receivable to raise theadditional cash and has asked you to determine the income statementeffects of the following transactions:
1. On July 1, 2020, Ibran assigned $600,000 of accountsreceivable to Provincial Finance Corporation as security for aloan. Ibran received an advance from Provincial Finance of 90% ofthe assigned accounts receivable less a commission of 3% on theadvance. Before December 31, 2020, Ibran collected $220,000 on theassigned accounts receivable, and remitted $232,720 to ProvincialFinance. Of the latter amount, $12,720 was interest on the advancefrom Provincial Finance.
2. On December 1, 2020, Ibran sold $300,000 of accountsreceivable to Wunsch Corp. for $275,000. The receivables were soldoutright on a without recourse basis and Ibran has no continuinginterest in the receivables.
3. On December 31, 2020, an advance of $120,000 was receivedfrom First Bank by pledging $160,000 of Ibran's accountsreceivable. Ibran's first payment to First Bank is due on January30, 2021. Instructions a. Prepare a schedule showing the incomestatement effects of 1004 these transactions for the year endedDecember 31, 2020.
Instructions
a. Prepare a schedule showing the income statement effects of
these transactions for the year ended December 31, 2020.
