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- Mar 8, 2013
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If anyone is a Factoring genius…I have an entry to make and I am not 100% sure.
Bank is Factoring $400,000 of the company’s receivables on a “with recourse” basis. Bank will remit 90% of the factored amount ($360,000), collect the receivables, and retain the remaining 10% ($40,000) until all of the receivables have been collected. When Bank collects all of the receivables, it will remit the retained amount, less a 4% fee ($16,000). Assume that the fair value of the last 10% of receivables is equal to $25,000.
Does this seem like the correct entry?
Dr Cash $360,000 (90% of receivables sold)
Dr Due from Factor 24,000 (40,000 hold back – 16,000 fee)
Dr Loss on sale (PLUG) 31,000 (15,000 uncollectable + 16,000 fee)
Cr Recourse Liability $ 15,000 (40,000 hold back – 25,000 value of hold back)
Cr Accounts Receivable 400,000 (receivables sold)
Bank is Factoring $400,000 of the company’s receivables on a “with recourse” basis. Bank will remit 90% of the factored amount ($360,000), collect the receivables, and retain the remaining 10% ($40,000) until all of the receivables have been collected. When Bank collects all of the receivables, it will remit the retained amount, less a 4% fee ($16,000). Assume that the fair value of the last 10% of receivables is equal to $25,000.
Does this seem like the correct entry?
Dr Cash $360,000 (90% of receivables sold)
Dr Due from Factor 24,000 (40,000 hold back – 16,000 fee)
Dr Loss on sale (PLUG) 31,000 (15,000 uncollectable + 16,000 fee)
Cr Recourse Liability $ 15,000 (40,000 hold back – 25,000 value of hold back)
Cr Accounts Receivable 400,000 (receivables sold)