Finney Fabrics Frequently Factors Its Accounts Receivable

question 119

Essay

Finney Fabrics frequently factors its accounts receivable.On March 15,2016,Finney sold without recourse $400,000 of these receivables to a factor.The factoring agreement requires Finney to be responsible for any sales returns and cash discounts taken by customers upon payment of the factored receivables.The factor assessed a finance charge of 5% on the gross amount of the factored receivables and held back an additional 4% to cover sales discounts,returns,and allowances.During 2016,customers returned merchandise associated with those receivables with a gross value of $5,000.The factor collected the remaining amount of the factored receivables,minus the 2% discount on 94% of the collected receivables.On June 10,the factor returned the balance owed to Finney.
Prepare Finney's journal entry to record
a.the sale of the receivables on March 15,2016;
b.the receipt of cash on June 10,2016.

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Definitions:

Population

The entire group of individuals or instances about which scientists are interested.

Probability

A gauge of the probability that a particular event will take place.

Burger King

An international fast-food restaurant chain known for its flame-broiled burgers and fast service.

Independent

A term used in statistics to describe two or more events that have no influence on each other's likelihood of occurring.