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Grace Corporation factors $200,000 of accounts receivable with Kelly Financing, Inc. on a with recourse basis. Kelly Financing will collect the receivables. The receivables records are transferred to Kelly Financing on April 10, 2014. Kelly Financing assesses a finance charge of 2% of the amount of accounts receivable and also reserves an amount equal to 6% of accounts receivable to cover probable adjustments.
Instructions
a) What conditions must be met for a transfer of receivables with recourse to be accounted for as a sale?
b) Assume the conditions from part (a) are met. Prepare the journal entry on April 10, 2014, for Grace to record the sale of receivables, assuming the recourse obligation has a fair value of $4,500.
Stacey and Andrew each own one-half of the stock in Parakeet Corporation, a calendar year taxpayer. Cash distributions from Parakeet are: $350,000 to Stacey on April 1 and $150,000 to Andrew on May 1.
Give all eliminating entries needed to prepare a consolidation workpaper for 2010 assuming that New Co. uses the fully adjusted equity method to account for its investment in Old Company.
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In preparing consolidated financial statements, what amount of this debt should be eliminated?
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A chair manufacturer has two divisions: framing and upholstering. The framing costs are $100 per chair and the upholstering costs are $200 per chair. What is the minimum transfer price for this company?
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