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Liono4ka [1.6K]

3 years ago

11

Pharoah Incorporated factored $154,700 of accounts receivable with Engram Factors Inc. on a with recourse basis. Engram assesses

a 3% finance charge of the amount of accounts receivable and retains an amount equal to 5% of accounts receivable for possible adjustments. Prepare the journal entry for Pharoah to record the sale, assuming that the recourse liability has a fair value of $6,720

1 answer:

VashaNatasha [74]3 years ago

5 0

Answer:

Cash 135,604 debit

Due from factor account: 7,735 debit

Loss on Factoring 18,081 debit

Recourse Liability 6,720 credit

Accounts Receivable 154,700 credit

--to record sales of account receivables--

Explanation:

fee: 154,700 x 3% = 4,641

retention: 154,700 x 5% = 7,735

recourse: 6,720

The company will receive cash for the difference between his account receivable and the discount above:

154,700 - 4,641 - 7,735 - 6,720 = 135.604‬

We post the retention as an assets as latter we will recove this amount.

Then, the recourse as a liaiblity. Write-off the receivables and later, the cash receipts.

The difference will be considered a loss.

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If 7000 dollars is invested in a bank account at an interest rate of 7 per cent per year, Find the amount in the bank after 14 y

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where:

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t = compounding period in years = 14

For interests compounded continuously, the Future value is given as:

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2. Interest compounded quarterly:

here, n = 3 ( there are 4 quarters in a year)

FV = 7,000 × $(1+\frac{0.07}{4} )^{4*14}$

FV = 7,000 × $1.0175^{56}$ = $18,493.77

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FV = 7,000 × $(1+\frac{0.07}{12} )^{12*14}$

FV = 7,000 × $1.005833^{168}$ = $18,598.16

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FV = PV × $e^{0.07 * 14}$

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