Question

Presented below is information for Marin Company.

1. Beginning-of-the-year Accounts Receivable balance was $23,100.
2. Net sales (all on account) for the year were $104,700. Marin does not offer cash discounts.
3. Collections on accounts receivable during the year were $85,400.

Marin is planning to factor some accounts receivable at the end of the year. Accounts totaling $13,900 will be transferred to Credit Factors, Inc. with recourse. Credit Factors will retain 6% of the balances for probable adjustments and assesses a finance charge of 5%. The fair value of the recourse obligation is $1,075.

Required:
Prepare (summary) journal entries to record the items noted above.

Answer 1

Answer:

Debit Accounts Receivable for $104,700; and Credit Sales Revenue for $104,700.

Debit Cash for $85,400; and Credit Accounts Receivable for $85,400.

Explanation:

The (summary) journal entries to record the items noted will look as follows:

Particulars                                   Debit ($)             Credit ($)        

Accounts Receivable                  104,700

Sales Revenue                                                         104,700

(To record net sales (all on account) for the year.)                        

Cash                                             85,400

Accounts Receivable                                               85,400

(Collections on accounts receivable during the year.)