Part II: Five Exercises@16 points each (80 points total) 1) On May 1, Onyx, Inc.
ID: 2587106 • Letter: P
Question
Part II: Five Exercises@16 points each (80 points total) 1) On May 1, Onyx, Inc. factored $300,000 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 $300,000 of accounts receivable with Cookie Finance with recourse. The recourse value of $5,000. Prepare the journal entry required on Onyx's books on May 1. provision has a fair Part Account a. b.Explanation / Answer
Books of Onyx Inc. a. Without recourse factoring Accounts Receivables 300000 Sales 300000 (When sale is made on account) Cash(Bal.fig.) 276000 Factoring Fee(300000*6%) 18000 Due from factor(300000*2%) 6000 Accounts Receivables 300000 (When receivable invoice is factored without recourse) Cash 6000 Due from factor(300000*2%) 6000 (Retained amount released by the factor ,on settlement of the invoice by the customer b. With Recourse Accounts Receivables 300000 Sales 300000 (When sale is made on account) Cash(Bal.fig.) 276000 Factoring Fee & Provision (300000*6%)+5000 23000 Due from factor(300000*2%) 6000 Recourse liability 5000 Accounts Receivables 300000 (When receivable invoice is factored with recourse) Cash 1000 Recourse liability 5000 Due from factor(300000*2%) 6000 (Retained amount released by the factor ,on settlement of the invoice by the customer, provision written off)