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18 September, 17:41

Whispering Incorporated factored $164,900 of accounts receivable with Metlock Factors Inc. on a without-recourse basis. Metlock assesses a 2% finance charge of the amount of accounts receivable and retains an amount equal to 6% of accounts receivable for possible adjustments. Prepare the journal entry for Whispering Incorporated and Metlock Factors to record the factoring of the accounts receivable to Metlock.

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  1. 18 September, 17:51
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    The journal entries are as follows:

    In the books of Whispering:

    Cash A/c Dr. $151,708

    Due from Metlock Ac Dr. $9,894

    Loss on sale of receivable A/c Dr. $3,298

    To Accounts receivable $164,900

    (To record factoring of accounts receivable on without recourse)

    Working notes:

    Due from Metlock = $164,900 * 6%

    = $9,894

    Loss on sale of receivable:

    = $164,900 * 2%

    = $3,298

    In the books of Metlock Factors:

    Accounts receivable A/c Dr. $164,900

    To Due to Whispering $9,894

    To Financing revenue $3,298

    To Cash $151,708

    (To record the accounts receivable)
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