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26 March, 07:04

Crane Inc. factors receivables with a carrying amount of $231,700 to Joffrey Company for $171,500 on a with recourse basis. The recourse provision has a fair value of $3,000. This transaction should be recorded as a sale. Prepare the appropriate journal entry to record this transaction on the books of Crane Inc.

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  1. 26 March, 07:55
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    Given that,

    Carrying amount = $231,700

    Recourse basis = $171,500

    Fair value of recourse provision = $3,000

    Net proceeds:

    = Cash received - Recourse liability

    = $171,500 - $3,000

    = $168,500

    Loss on sale of receivables:

    = Carrying value - Net proceeds

    = $231,700 - $168,500

    = $63,200

    Therefore, the journal entry is as follows:

    Cash A/c Dr. $171,500

    Loss on sale of receivables A/c Dr. $63,200

    To recourse liability $3,000

    To Accounts Receivable $231,700

    (To record the loss on sale of receivables)
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