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Recording Purchase of Accounts Receivable Without Recourse Bappa Apparel manufactures fine sportswear for many national retailers and frequently sells its receivables to factors as a
Recording Purchase of Accounts Receivable Without Recourse Bappa Apparel manufactures fine sportswear for many national retailers and frequently sells its receivables to factors as a means of accelerating cash collections. Bappa sold $180,000 of receivables to a factor. The receivables were sold without recourse. The factor charged 6% and held back 5% for sales adjustments. Assume that the factor estimates that expected credit losses are 2% of the accounts receivable balance. Record the journal entry for the factor at the time the receivables are purchased. Account Name Dr. Cr. . Payable to Seller of Receivables Cash To record purchase of receivables To record estimate of uncollectible accounts
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