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.
What will be an ideal response?
| a. | Cash [($540,000´0.85)-($540,000´0.10)] | 405,000 | ? | |
| ? | Receivable from Factor ($540,000´0.15) | 81,000 | ? | |
| ? | Factoring Expense ($540,000´0.10) | 54,000 | ? | |
| ? | ? | Accounts Receivable | ? | 540,000 |
| ? | ? | ? | ? | |
| b. | Sales Returns and Allowances | 2,200 | ? | |
| ? | ? | Receivable from Factor | ? | 2,200 |
| ? | ? | ? | ? | |
| c. | Cash | 78,800 | ? | |
| ? | ? | Receivable from Factor | ? | 78,800 |
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