Angler Fish Co

question 83

Essay

Angler Fish Co. factored $540,000 of its accounts receivable to Gause Finance Co. Gause Finance advanced 85% of the factored receivables and charged a 10% commission on the gross amount of the receivables. All conditions for a sale have been met.
Required:
Prepare the journal entries necessary to record the following:
a. The sale of the receivables.
b. Sales Returns and Allowances of $2,200 on a factored account.
c. The conclusion of the sale agreement when Angler would collect any balance remaining.

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Definitions:

Acquisition Method

A set of accounting procedures used for consolidating the financial statements of a parent company and its subsidiaries.

Fair Value

The estimated market value to sell an asset or the required payment to delegate a liability, during a structured transaction as of the specified valuation date.

Partial Equity Method

An accounting approach used when an investing entity has significant influence over an investee but does not consolidate its financial statements.