Larkspur Incorporated factored $124,300 of accounts receivable with Cullumber Factors Inc. on a without-recourse basis. Cullumbe

Question

Klio2033 [76]

3 years ago

5

Larkspur Incorporated factored $124,300 of accounts receivable with Cullumber Factors Inc. on a without-recourse basis. Cullumbe

r assesses a 2% finance charge of the amount of accounts receivable and retains an amount equal to 5% of accounts receivable for possible adjustments.
Required:
Prepare the journal entry for Larkspur Incorporated and Cullumber Factors to record the factoring of the accounts receivable to Cullumber.

Business

1 answer:

Andrej [43] · Answer 1 · 2022-07-20T23:13:18+03:00

<h2>Answer:</h2>

<h2>Larkspur Incorporated </h2>

DR Cash 115,599

Due from Factor (Cullumber) 6,215

Loss on Sale of Receivables 2,486

CR Accounts Receivable 124,300

Working

Due from Factor = 5% * 124,300

= $‭6,215‬

Loss on sale of receivables = 2% * 124,300

= $‭2,486‬

Cash = 124,300 - 6,215 - 2,486

= $‭115,599‬

<h2>Cullumber Factors Inc.</h2>

DR Accounts Receivable 124,300

CR Due to Larkspur 6,215

Financing Revenue 2,486

Cash 115,599