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Commercial factors inc cash duefromfactor

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Unformatted text preview: s Sales (FACTORING) Illustration: Crest Textiles, Inc. (COMPANY) factors $500,000 of A/R with Commercial Factors, Inc., (FACTOR) without recourse (so purchaser assumes collection risk.) Commercial Factors assesses a finance charge of 3% of A/R and retains an amount equal to 5% of A/R (for potential future “adjustments”.) Crest Textiles and Commercial Factors make the following journal entries for the A/R transferred without recourse. Illustration 7-17 Chapter 7-60 LO 8 Explain accounting issues related to disposition LO of accounts and notes receivable. of Sales of Receivables (FACTORING) Sales of Receivables ((FACTORING) FACTORING) Sales Sales (FACTORING) Illustration: Assume Crest Textiles sold the A/R with recourse (seller maintains collection risk.) Crest Textiles determines that the recourse obligation has a fair value of $6,000. To determine the loss on the sale of the receivables, Crest Textiles computes the net proceeds from the sale as follows. Illustration 7-18 Net Proceeds Computation Illustration 7-19 Loss on Sa...
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