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13 September, 04:54

Indigo Incorporated factored $135,100 of accounts receivable with Sweet Factors Inc. on a without-recourse basis. Sweet 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 Indigo Incorporated and Sweet Factors to record the factoring of the accounts receivable to Sweet.

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  1. 13 September, 05:52
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    Indigo Incorporated Journal entrie

    Dr Cash 121,590

    Dr Due from Factor 9,457

    Dr Loss on Sale of Receivable 4,053

    Cr Accounts Receivable 135,100

    Sweet Factors Inc

    Dr Account Receivable 135,100

    Cr Due to Customer 9,457

    Cr Finance Revenue 4,053

    Cr Cash 121,590

    Explanation:

    Indigo Incorporated Journal entries

    Dr Cash 121,590

    Dr Due from Factor 9,457

    Dr Loss on Sale of Receivable 4,053

    Cr Accounts Receivable 135,100

    Sweet Factors Inc

    Dr Account Receivable 135,100

    Cr Due to Customer 9,457

    Cr Finance Revenue 4,053

    Cr Cash 121,590

    Due from Factor = 7% x $135,100 = $9,457

    Loss on Sale of Receivables = 3% x $135,100 = $4,053
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