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23 April, 15:10

Ames Quartet Inc. factors receivables with a carrying amount of $200,000 to Joffrey Company for $160,000 on a with recourse basis. The recourse provision has a fair value of $1,000. This transaction should be recorded as a sale. Prepare the appropriate journal entry to record this transaction on the books of Ames Quartet Inc.

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  1. 23 April, 18:01
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    Ames Quartet Inc Debit Credit

    cash $160000

    loss on sale $40000

    Account receivable 160000

    recourse liability 1000

    Explanation:

    Factoring with recourse refers to a practice where a company sells it' s loan or receivable to a factor or another company for immediate cash. The factor is guaranteed an amount called ' Recourse'.
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