NEED HELP ON HOW TO FIND THE LOSS ON SALE OF RECEIVABLES
AND THE LOSS ON SALE OF NOTE RECEIVABLE
Retu 2. Exercise 7-24 (Algo) Factoring of accounts receivable with recourse [LO7-8] Mountain High Ice Cream Company transferred $72,000 of accounts receivable to the Prudential Bank. The transfer was made with recourse. Prudential remits 90% of the factored amount to Mountain High and retains 10% to cover sales returns and allowances. When the bank collects the receivables, it will remit to Mountain High the retained amount (which Mountain estimates has a fair value of $6,200). Mountain High anticipates a $4,200 recourse obligation. The bank charges a 2% fee (2% of $72,000), and requires that amount to be paid at the start of the factoring arrangement. Required: Prepare the journal entry to record the transfer on the books of Mountain High assuming that the sale criteria are met. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) X Answer is not complete. No Event Debit Credit 1 1 63,360 General Journal Cash Loss on sale of receivables Receivable from factor Recourse liability Accounts receivable 6,200 4.200 72,000 Problem 7-10 (Algo) Miscellaneous receivable transactions [LO7-3, 7-4, 7-7, 7-8] Evergreen Company sells lawn and garden products to wholesalers. The company's fiscal year-end is December 31. During 2021, the following transactions related to receivables occurred: Feb. 28 Sold merchandise to Lennox, Inc., for $12,000 and accepted a 10%, 7-month note. 10% is an appropriate rate for this type of note. Mar. 31 Sold merchandise to Maddox Co. that had a fair value of $9,000, and accepted a noninterest-bearing note for which $10,000 payment is due on March 31, 2022. Apr. 3 Sold merchandise to Carr Co. for $7,000 with terms 3/10, n/30. Evergreen uses the gross method to account for cash discounts. 11 Collected the entire amount due from Carr Co. 17 A customer returned merchandise costing $5,200. Evergreen reduced the customer's receivable balance by $7,000, the sales price of the merchandise. Sales returns are recorded by the company as they occur. 30 Transferred receivables of $70,000 to a factor without recourse. The factor charged Evergreen a 2% finance charge on the receivables transferred. The sale criteria are met. June 30 Discounted the Lennox, Inc., note at the bank. The bank's discount rate is 12%. The note was discounted without recourse. Sep. 30 Lennox, Inc., paid the note amount plus interest to the bank. Required: 1. Prepare the necessary journal entries for Evergreen for each of the above dates. For transactions involving the sale of merchandise, ignore the entry for the cost of goods sold. 2. Prepare any necessary adjusting entries at December 31, 2021. Adjusting entries are only recorded at year-end. 3. Prepare a schedule showing the effect of the journal entries on 2021 income before taxes. Discounted the Lennox, Inc., note at the bank. The bank's discount rate is 12%. The note was discounted without recourse. Note: Enter debits before credits. Debit Credit Date June 30, 2021 General Journal Cash Loss on sale of notes receivable Interest receivable Notes receivable 400 12,000
