Presented below is information for Kingbird, Inc. for 2017: 1. Beginning-of-the-year Accounts Receivable balance was $183,000. 2. Net sales for the year were $1,725,000. $170,000 of the sales were cash sales. Kingbird does not offer cash discounts for early payment. 3. Collections on accounts receivable during the year were $1,497,000. Kingbird plans to factor accounts receivable totaling $70,000 at the end of the year. Kingbird will transfer the accounts to Herzog Factors, Inc. with recourse. Herzog Factors will retain 3% of the balances for probable adjustments and assesses a finance charge of 5%. The fair value of the recourse obligation is $2,500.
Prepare the journal entry to record the sale of the receivables.
| Cash | 64,400 | |
| Loss from sale of receivables (70,000*5%) + 2500 | 6000 | |
| Receivable from factor (70,000*3%) | 2,100 | |
| Recourse liability | 2,500 | |
| Accounts Receivable | 70,000 | |
Comment if you face any issues
Presented below is information for Kingbird, Inc. for 2017: 1. Beginning-of-the-year Accounts Receivable balance was $183,000....