Question

Wood Incorporated factored $165,600 of accounts receivable with Engram Factors Inc. on a without recourse basis. Engram assesses a 3% finance charge of the amount of accounts receivable and retains an amount equal to 7% of accounts receivable for possible adjustments.Prepare the journal entry for Wood Incorporated and Engram Factors to record the factoring of the accounts receivable to Engram. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.)

Answer 1

Answer:

The journal entries are shown below:

Explanation:

Cash $149,040

Due from factor $11,592   ($165,600 × 3%)

Loss on sale of receivables $4,968    ($165,600 × 3%)

        To Account receivable    $165,600

(Being the factoring of account receivable is recorded)

Account receivable    $165,600

       To Due from factor $11,592   ($165,600 × 3%)

        To Cash $149,040

       To Gain on sale of receivables $4,968    ($165,600 × 3%)

(Being the factoring of account receivable is recorded)

Only these entries are passed