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19 March, 08:27

Sheridan Incorporated factored $158,900 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 Sheridan to record the sale, assuming that the recourse liability has a fair value of $7,760.

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  1. 19 March, 10:28
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    The Journal Entry is shown below:-

    Cash Dr, $144,599

    $158,900 - ($158,900 * 3%) - ($158,900 * 6%)

    Due from factor Dr, $9,534

    ($158,900 * 6%)

    Loss on sale receivable $12,527

    $158,900 * 3% + $7,760

    To Accounts receivable $158,900

    To recourse liability $7,760

    (Being Sales is recorded)
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