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ss7ja [257]
3 years ago
5

Whispering Incorporated factored $164,900 of accounts receivable with Metlock Factors Inc. on a without-recourse basis. Metlock

assesses a 2% finance charge of the amount of accounts receivable and retains an amount equal to 6% of accounts receivable for possible adjustments. Prepare the journal entry for Whispering Incorporated and Metlock Factors to record the factoring of the accounts receivable to Metlock.
Business
1 answer:
GuDViN [60]3 years ago
5 0

Answer:

The journal entries are as follows:

In the books of  Whispering:

Cash A/c Dr. $151,708

Due from Metlock Ac Dr. $9,894

Loss on sale of receivable A/c Dr. $3,298

         To Accounts receivable                         $164,900

(To record factoring of accounts receivable on without recourse)

Working notes:

Due from Metlock = $164,900 × 6%

                               = $9,894

Loss on sale of receivable:

=  $164,900 × 2%

= $3,298

In the books of Metlock Factors:

Accounts receivable A/c Dr. $164,900

            To Due to Whispering             $9,894

            To Financing revenue             $3,298

            To Cash                                   $151,708

(To record the accounts receivable)

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