Part II: Five Exercises @ 16 points each (80 points total 1) On May 1, Onyx, Inc

Question

Part II: Five Exercises @ 16 points each (80 points total 1) On May 1, Onyx, Inc. factored $600,000 of accounts receivable with Cookie Finance without recourse. Cookie Finance assessed a finance charge of 6% of the total accounts receivable factored and retained an amount equal to 2%. Assume the transaction is a sale. Required a. Prepare the journal entry required on Onyx's books on May 1 b. Now assume that Onyx factors the $600,000 of accounts receivable with Cookie Finance with recourse. The recourse provision has a fair value of $10,000. Prepare the journal entry required on Onyx's books on May 1 Part Account a. b. 51Page

Explanation / Answer

JOURNAL

Part

Account

Debit

Credit

(a)

Cash

$5,52,000

Due from Factor (2% of A/R)

$12,000

Loss on Sale of receivable (6% of A/R)

$36,000

        Accounts Receivable

$6,00,000

(Sale of Accounts receivable without recourse)

(b)

Cash

$5,42,000

Due from Factor (2% of A/R)

$12,000

Loss on Sale of receivable (6% of A/R)

$46,000

        Accounts Receivable

$6,00,000

        Recourse Liability

$10,000

(Sale of Accounts receivable with recourse)

JOURNAL

Part

Account

Debit

Credit

(a)

Cash

$5,52,000

Due from Factor (2% of A/R)

$12,000

Loss on Sale of receivable (6% of A/R)

$36,000

        Accounts Receivable

$6,00,000

(Sale of Accounts receivable without recourse)

(b)

Cash

$5,42,000

Due from Factor (2% of A/R)

$12,000

Loss on Sale of receivable (6% of A/R)

$46,000

        Accounts Receivable

$6,00,000

        Recourse Liability

$10,000

(Sale of Accounts receivable with recourse)

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