Information on Janut Corp., which reports under ASPE, follows:
July 1 Janut Corp. sold to Harding Ltd. merchandise having a sales price of $9,000, terms 3/10, n/60. Janut records its sales and receivables net.
3 Harding Ltd. returned defective merchandise having a sales price of $700.
5 Accounts receivable of $19,000 (gross) are factored with Jackson Credit Corp. without recourse at a financing charge of 9%. Cash is received for the proceeds and collections are handled by the finance company. (These accounts were subject to a 2% discount and were all past the discount period.)
9 Specific accounts receivable of $15,000 (gross) are pledged to Landon Credit Corp. as security for a loan of $11,000 at a finance charge of 3% of the loan amount plus 9% interest on the outstanding balance. Janut will continue to make the collections. All the accounts receivable pledged are past the discount period and were originally subject to a 2% discount.
Dec. 29 Harding Ltd. notifies Janut that it is bankrupt and will be able to pay only 10% of its account. Give the entry to write off the uncollectible balance using the allowance method. (First record the increase in the receivable on July 11 when the discount period passed.)
Instructions
(a) Prepare all necessary journal entries on Janut Corp.'s books.
(b) Would your treatment of the July 5 transaction change if Janut reported under IFRS? If yes, how?
(c) What if the receivables factored on July 5 were with recourse? Would your answer change if Janut reported under IFRS or ASPE?