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Sale of receivables with recourse

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The required disclosures for sale of receivables is given in the solution.

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For sale of receivables with recourse, what is, if any, the required disclosure? Explain the importance of this point.

STEP 1
If there is a sale of receivables with recourse, the seller or the transferor should make a disclosure as a sale if three conditions are met that is first, if the seller gives up his control of the future benefits relating to the receivables, second, the transferor can reasonably find out or determine its obligations under the "recourse" provisions, and thirdly, the ...

Solution Summary

The legally required disclosures for sale of receivable is given.

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See Also This Related BrainMass Solution

Accounting for Accounts and Notes Receivable

Question one:
Love Inc factored $800,00 of accounts receivable with Jaz Finance on a without recourse basis on June 30. The terms of the contract stated that Jaz Finance was to make collections, handle sales discounts and absorb the credit losses. Other terms included Love Inc to pay a finance charge of 8% of the total accounts receivables factored. Jaz Finance will also retain an amount to cover sales discounts in the amount of 2% of the total receivables.

A) On June 30, Love Inc. would journalize what entry in their books?
B) On June 30, Jaz Finance would journalize what entry in their books?

Question 2:
Love Inc. factored $800,000 of accounts receivable with Jaz Finance on a with recourse basis on June 30. The fair value of the recourse provision is $40,000. Other terms included Love Inc to pay a finance charge of 8% of the total accounts receivable factored. Jaz Finance will also retain an amount to cover sales discounts in the amount of 2% of the total receivables.

A) prepare the entry that Love Inc would journalize on their books.

Question 3:
DJ Inc. Issued a promissory note to Bliss Inc in the amount of $400,000 on January 1, 2004 the due date is December 31, 2008. The note has a stated rate of 4%. Interest is due each year on December 31. The current yield rate of interest is 8%.

A) What is the present value of the note.
B) What entry would DJ Inc journalize for the issuance of the note?

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