Culver Corp. factors $351,000 of accounts receivable with Larkspur Finance Corporation on a without recourse basis on July 1, 2020. The receivables records are transferred to Larkspur Finance, which will receive the collections. Larkspur Finance assesses a finance charge of 1.90% of the amount of accounts receivable and retains an amount equal to 4% of accounts receivable to cover sales discounts, returns, and allowances. The transaction is to be recorded as a sale. Prepare the journal entry on July 1, 2020, for Culver Corp. to record the sale of receivables without recourse. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.)
Bad Debts
At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
Culver Corp. factors $351,000 of accounts receivable with Larkspur Finance Corporation on a without recourse basis on July 1, 2020. The receivables records are transferred to Larkspur Finance, which will receive the collections. Larkspur Finance assesses a finance charge of 1.90% of the amount of accounts receivable and retains an amount equal to 4% of accounts receivable to cover sales discounts, returns, and allowances. The transaction is to be recorded as a sale.
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