Journal Entries to Account for the Factoring of Receivable - Review

On November 5, Archie Enterprises sold $230,000 of accounts receivable to Raymore Factors, Inc. Raymore Factors assesses a finance charge of 4% of the amount of accounts receivable and retains an amount equal to 8% of accounts receivable.

Instructions:

1. Prepare journal entries for both companies assuming that the receivables were factored on a     without recourse basis.
Date	Archie Enterprises - Without Recourse	Debits	Credits
Nov. 5
Date	Raymore Factors- Without Recourse	Debits	Credits
Nov. 5
2. Assume instead that the receivables are sold with recourse.  Prepare the journal entry for     Archie to record the sale, assuming the recourse obligation has a fair value of $15,000.
Date	Archie Enterprises- With Recourse	Debits	Credits
3. On May31, Raymore Factors reported collections of $92,000 from factored receivable, sales returns and allowances of $11,500, sales discounts taken of $6,900. Prepare the journal entry to record the collection for both companies.
Date	Archie Enterprises	Debit	Credit
Date	Raymore Factors	Debit	Credit

Journal Entries to Account for the Factoring of Receivable - Review

On November 5, Archie Enterprises sold $230,000 of accounts receivable to Raymore Factors, Inc. Raymore Factors assesses a finance charge of 4% of the amount of accounts receivable and retains an amount equal to 8% of accounts receivable.

Instructions:
1. Prepare journal entries for both companies assuming that the receivables were factored on a     without recourse basis.
Date	Archie Enterprises - Without Recourse	Debits	Credits
Nov. 5	Cash {$230,000 - [$230,000 x (4% + 8%)]}	202,400
	Due from Factor [$230,000 x 8%]	18,400
	Loss on Sale of A/R [plug]	9,200
	Accounts Receivable		230,000
Date	Raymore Factors- Without Recourse	Debits	Credits
Nov. 5	Accounts Receivable	230,000
	Due to Archie		18,400
	Financing Revenue		9,200
	Cash		202,400
2. Assume instead that the receivables are sold with recourse.  Prepare the journal entry for     Archie to record the sale, assuming the recourse obligation has a fair value of $15,000.
Date	Archie Enterprises- With Recourse	Debits	Credits
	Cash {$230,000 - [$230,000 x (4% + 8%)]}	202,400
	Due from Factor [$230,000 x 8%]	18,400
	Loss on Sale of A/R [plug]	24,200
	Recourse Liability		15,000
	Accounts Receivable		230,000
3. On May31, Raymore Factors reported collections of $92,000 from factored receivable, sales returns and allowances of $11,500, sales discounts taken of $6,900. Prepare the journal entry to record the collection for both companies.
Date	Archie Enterprises	Debit	Credit
	Sales Ret. and Allow.	11,500
	Sales Discounts	6,900
	Due from Factor		18,400
Date	Raymore Factors	Debit	Credit
	Cash [$92,000 - $11,500 - $6,900]	73,600
	Due to Archie	18,400
	Accounts Receivable		92,000