• Compute the net proceeds of the sale.
  • Compute the gain or loss of the transaction.

Prepare the journal entry for ABC to record the sale of the transaction

Chapter 7 Homework 2A 1) The ABC company has decided to factor its accounts receivables to XYZ company on a without recourse basis. The total amount of the AR is $425,000. XYZ will take title and collect the receivables, charging 2.5% of the total receivable as a finance charge. The two companies agree that XYZ will retain an amount equal to 5% of the receivable to cover sales returns. The transaction is to be recorded as a sale on October 1 st, 2016. a. Required: i. Prepare the entry on October 1st for ABC to record the sale of the receivable without recourse. ii. Prepare the entry on October 1st for XYZ to record the purchase of the receivable without recourse. 2) Suppose the transaction was to be treated on a recourse basis. Assume the fair value of the recourse obligation is $3,000. a. Required: i. Compute the net proceeds of the sale. ii. Compute the gain or loss of the transaction. iii. Prepare the journal entry for ABC to record the sale of the transaction. Chapter 7 Homework (Spring 2016) The Andrew Company provides you with the following information on December 31, 2017 as it prepares to close its books for the year Accounts Receivable Balance (before write offs): Allowance for Doubtful Accounts Balance (before write offs): Accounts deemed to be uncollectible: Bad Debt rate based on % of AR balance: Net Credit Sales 2017: Bad Debt Rate Based on % of Credit Sales: $4,220,500 155,000 141,000 3.8% $12,710,000 1.2% Required: 1) Assuming Andrew Co uses the balance sheet (AR balance) approach: a. Record the write off of uncollectible accounts. b. What is the new allowance for doubtful accounts balance after all adjustments. c. What is the bad debt expense, record the entry. d. What is the new Net Realizable Value of the receivable on the balance sheet as of December 31, 2017. 2) Repeat the exercise assuming Andrew Co uses the income statement approach