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Unformatted text preview: le Computation Chapter 7-61 N O T O N E X A M 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: Prepare the journal entries for both Crest Textiles and Commercial Factors for the receivables sold with recourse (seller maintains collection risk) Crest Textiles, Inc. Commercial Factors, Inc. Cash Due from Factor Loss on Sale of Receivables Accounts (Notes) Receivable Recourse Liability 460,000 25,000 21,000 Accounts Receivable Due to Crest Textiles Financing Revenue Cash 500,000 Different from w/o recourse for seller 500,000 6,000 N O T O N 25,000 15,000 460,000 E X A NOTE: If there is an uncollectable, Crest pays Commercial and reduces its Recourse Liability account. M If not, Crest kills the liability against income. Chapter 7-62 Same as w/o recourse for buyer LO 8 Explain accounting issues related to disposition of accounts and notes receivable. of Secured Borrowing ((PLEDGING) Secured Borrowing PLEDGING) Secured Se...
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