Question
Saber Boat Industries, Inc. sells (factors) $840,000 of Accounts Receivables with the Blue Water Finance Company on a with recourse basis. Blue Water acquires the
Saber Boat Industries, Inc. sells (factors) $840,000 of Accounts Receivables with the Blue Water Finance Company on a with recourse basis. Blue Water acquires the receivables on January 31, 2018 assessing a finance charge of 5%, and also reserving 8% for covering probable adjustments. In addition, a recourse liability amounting to a fair value of $15,000 is accrued.
a. Based on the contractual arrangement above, prepare the journal entry at January 31st for Distribution Industries, Inc.
Debit Credit
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b. Village Marine provided you with the following financial information before adjustments as of December 31, 2017:
Debit Credit
Cash 103,764
Accounts Receivable 407,680
Allowance For Doubtful Accounts 3,355
Sales Revenue 2,645,090
Sales Returns and Allowances 16,847
Prepare the year end adjusting entry assuming that the allowance for doubtful accounts is to provide for doubtful accounts based on 2.5% of gross accounts receivable.
Debit Credit
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