Bramble Woodcrafters sells $202,300 of receivables to Commercial Factors, Inc. on a with recourse basis. Commercial assesses a finance charge of 5% and retains an amount equal to 4% of accounts receivable. Bramble estimates the fair value of the recourse liability to be $8,710. Prepare the journal entry for Bramble to record the sale.

Dr Cash $184,093

Dr Due from Factor $8,092

Dr Loss on Sale of Receivables $18,825

Cr Accounts Receivable $202,300

Cr Recourse Liability $8,710

Explanation:

Preparation of the journal entry for for Bramble to record the sale.

Dr Cash $184,093

$202,300 – [$202,300 * (.05 + .04)]

$202,300-(202,300*0.09)

$202,300-$18,207

=$184,093

Dr Due from Factor $8,092

($202,300 *.04)

Dr Loss on Sale of Receivables $18,825

(184,093+8,092-$211,010)

Cr Accounts Receivable $202,300

Cr Recourse Liability $8,710

(Accounts Receivable $202,300 + Recourse Liability $8,710 =$211,010)

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