Problem 8-12

1. Journal Entry to Record the Factoring

Cash 150,000
Service Charge 10,000
Receivable from Factor 40,000
Accounts Receivable 200,000

2. Prepare journal entry to record the assignment

Accounts Receivable- Assigned 300,000

Accounts Receivable 300,000

Cash 225,000
Service Fees 15,000
Notes Payable 240,000

3. Prepare journal entry to adjust the allowance for doubtful accounts on December 31.
Doubtful Accounts 35,000
Allo Doubtful Accounts 35,000

How did I get?

Allowance (1,300,000x0.05) 65,000
Less: Allowances- January 1 -30,000
Doubtful Accounts 35,000

4. Indicate the classification, Presentation and disclosure of the accounts receivable involved in receivable financing

Accounts Receivable- Unassigned 1,000,000

Accounts Receivable- Assigned 300,000
Total 1,300,000
Less: Allowance for Doubtful Accounts 65,000
Net Realizable value 1,235,000

Included in Trade and other Receivables 40,000

Note payable- Bank is classified as Current Liability 240,000

Accounts Receivable Assigned 300,000

Note Payable- Bank -240,000
Equity in Assigned Accounts 60,000
eceivable financing