User Account

All Pages

Record the sale of the inventory on January

Assignment Help Accounting Basics
Reference no: EM132750662

Question - On January 1, 2020, Caribou Explorations Limited (CEL) sold inventory costing $32,000 and, in exchange, received $6,000 cash and a $40,000 promissory note. The five-year note was repayable in equal annual instalments of $8,734 including interest at 7%. The market rate of interest for similar transactions was 7%. The first payment was due January 1, 2021. CEL has a December 31 year-end and follows IFRS. CEL uses the net method.

CEL also extends generous payment terms to its many customers. As a result, the company has accumulated a substantial portfolio of accounts receivables. To improve cash flow, the company decided to sell some of its receivables to a factor. On June 30 2020, CEL factored $300,000 of its account receivables. CEL had previously checked the creditworthiness of its customers and is, therefore, confident that only a few accounts will be uncollectible. Therefore, the company chose to factor these receivables with recourse. In exchange for these receivables, the factor paid CEL $0.96 on each dollar of receivables on the date of transfer. In addition, the factor held $0.08 on each dollar for potential uncollectible accounts. CEL estimates that the recourse obligation has a fair value of $8,000.

(a) Form the journal entry on the books of CEL to record the sale of the inventory on January 1, 2020, receipt of the first instalment payment on January 1, 2021, and accrued interest for 2021.

(b) Form the journal entry on the books of CEL for the transfer of the receivables with recourse on June 30, 2020.

Reference no: EM132750662

Questions Cloud

Why do organizations need both grievance procedures : Why do organizations need both grievance and disciplinary procedures? What is the role played by the supervisor in handling grievances?
What amount of Maintenance Services total cost is allocated : Maintenance Services has costs of $110,000 before any allocations. What amount of Maintenance Services total cost is allocated to the Packaging Department
What was the scope of the study : What was the scope of the study? How does the research contribute to the field of KM? What particular concepts, techniques does it address?
Review the functions of human resource management : Determine which function is the most important function to an organization's overall success. Review the functions of human resource management.
Record the sale of the inventory on January : Form the journal entry on the books of CEL to record the sale of the inventory on January 1, 2020, receipt of the first instalment payment on January
What are possible consequences of your refusal to bargain : You are the industrial relations director for WLWI radio in Montgomery, Alabama. Your employees have been members of the CWA for the past 5 years and the.
How a maintenance model is intended to complement : How a maintenance model is intended to complement the chosen management model and focus organizational effort on maintaining systems.
Compute for the annual cash flow that the security pays : The security sells for P243,078.50 and has a yield to maturity of 7.3%. Compute for the annual cash flow that the security pays for years 4 through 9
Description of community engagement types : Description of community engagement types and approaches including advocacy, community-based research, direct community engagement

Reviews

Write a Review

Accounting Basics Questions & Answers

  Donald was killed in an accident while he was on the job in

donald was killed in an accident while he was on the job in 2010. his employer had provided donald with group term life

  Compute the amount recorded for depreciation expense

Machinery was purchased at the beginning of 2017 for $450,000. Compute the amount recorded for 2020 depreciation expense

  Paloma co stars has four employees fica social security

paloma co. stars has four employees. fica social security taxes are 6.2 of the first 110100 paid to each employee and

  Knarles and barkley are father and son respectively barkley

knarles and barkley are father and son respectively. barkley is seventeen years old. they operate a facilities

  What is the entry for payment of the invoice

On September 10, the invoice was paid when the exchange rate was $1.75 = 1 pound. What is the entry for payment of the invoice

  Discuss the ethical dilemma faced by joe mammoth

Discuss the ethical dilemma faced by Joe Mammoth and the CEO. Who are the stakeholders and how are they affected

  What skill must be developed to evaluate company performance

What is managerial accounting and how does it help businesses create a competitive advantage? What skills must be developed to evaluate company performance

  What is the total gain recognized by allen on the exchange

What is the total gain recognized by Allen on the exchange? Allen transferred 3 assets to a newly formed corporation in exchange for 100 share

  Which of the three companies you will select for lending

If you are asked to evaluate these three companies for lending purposes, which of the three companies you will select for lending? Explain Why

  Prepare journal entries to record the sale of merchandise

Prepare journal entries to record the sale of merchandise, the December 31, 2016 interest accrual, and the March 31, 2017 collection

  Described movements on the equation basic accounting

Indicates the effect of the described movements on the equation basic accounting . He bought a place to set up his office, paying with a $200,000 check.

  What is the free cash flow to the firm

A firm reports EBIT of $100 million. The income statement shows depreciation of $20 million. If the tax rate is 35% and total capital expenditures and increases in working capital total $10 million, what is the free cash flow to the firm?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd