Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

3. On May 1, Kristopher Evan, Inc. factored $400,000 of accounts receivable with Rapid Finance on a without recourse basis. Rapid Finance assessed a finance

3. On May 1, Kristopher Evan, Inc. factored $400,000 of accounts receivable with Rapid Finance on a without recourse basis. Rapid Finance assessed a finance charge of 3% of the total accounts receivable factored and retained an amount equal to 6% of the total receivables to cover sales discounts and returns. Required: a. Prepare the journal entry required on Kristophers books on May 1. b. Assume the receivables were factored on a with recourse basis instead. The recourse provision has a fair value of $10,000. Prepare the journal entry required on Kristophers books on May 1. c. Assume, instead, that on May 1 Kristopher assigned the accounts receivable to First State Bank as security for a loan in the amount of 300,000. First State charged a 2.5% finance fee on the receivables and the interest rate is 5%. Prepare the journal entry required on Kristophers books on May 1. d. Related to d., assume that Kristopher collected $125,000 on the receivables. Prepare the journal entry required by Kristopher. e. Kristopher remitted to First State Bank the collections from e. plus one months interest on the note payable. Prepare the journal entry required by Kristopher

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Accounting For Beginners

Authors: Neel Gaines

1st Edition

1801120897, 978-1801120890

More Books

Students also viewed these Accounting questions