Listed Below Are Two Independent Situations Involving the Disposition of Receivables

question 108

Essay

Listed below are two independent situations involving the disposition of receivables.
1. Morales Company sells $320000 of its receivables to Instant Factors Inc. Instant Factors assesses a finance charge of 3% of the amount of receivables sold.
Instructions
Prepare the journal entry to record the sale of the receivables on Morales Company's books.
2. A restaurant is the site for a large company party. The bill totals $3400 and is charged by the patron on a Visa credit card.
Instructions
Assume a 3% service fee is charged by Visa. Record the entry for the transaction on the restaurant's books.

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Definitions:

Interest Expense

The cost incurred by an entity for borrowed funds, including the cost of servicing debt.

Merger Incremental Cash Flow Analysis

The process of evaluating the additional cash flows a company expects to receive from a merger or acquisition.

Vertical Merger

Occurs when a company acquires another firm that is “upstream” or “downstream”; for example, an automobile manufacturer acquires a steel producer.

Petrochemical Firm

A company involved in the production of chemical products derived from petroleum and natural gas.