The controller for Riverbed Corporation has reached an agreement with Concord Financing Ltd. to sell a large portion of Riverbed'spast-due accounts receivable. Riverbed agrees to sell $1,950,000 of accounts receivable to Concord with recourse. Riverbed'scontroller estimates that the fair value of Riverbed's liability to pay Concord for uncollectible accounts is $177,000. Concord willcharge Riverbed 7% of the total receivables balance as a financing fee, and will withhold an initial amount of 8%.(a)- Your answer is partially correctCalculate the net proceeds and the gain or loss on the disposal of receivables to Concord Financing LtdNet proceeds1657500Loss on disposal of receivables$233500i

First, we need to calculate the financing fee that Concord will charge Riverbed. This is done by…

Answered: The controller for Riverbed Corporation…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter3: Evaluation Of Financial Performance

Section: Chapter Questions

Problem 16P

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The controller for Bramble Corporation has reached an agreement with Sheffield Financing Ltd. to sell a large portion of Bramble's past-due accounts receivable. Bramble agrees to sell $1,820,000 of accounts receivable to Sheffield with recourse. Bramble's controller estimates that the fair value of Bramble's liability to pay Sheffield for uncollectible accounts is $163.000. Sheffield will charge Bramble 9% of the total receivables balance as a financing fee, and will withhold an initial amount of 10% (a) Calculate the net proceeds and the gain or loss on the disposal of receivables to Sheffield Financing Ltd. Net proceeds ✓on disposal of receivables S $
The controller for Bramble Corporation has reached an agreement with Sheffield Financing Ltd. to sell a large portion of Bramble's past-due accounts receivable. Bramble agrees to sell $1,820,000 of accounts receivable to Sheffield without recourse. Bramble's controller estimates that the fair value of uncollectible accounts is $163,000. Sheffield will charge Bramble 9% of the total receivables balance as a financing fee, and will withhold an initial amount of 10%. The transaction is treated as a sale. (a) - Your answer is partially correct. Calculate the net proceeds and the gain or loss on the disposal of receivables to Sheffield Financing Ltd. Net proceeds Loss V on disposal of receivables $ $ 1493200 326800
The controller for Bridgeport Corporation has reached an agreement with Sarasota Financing Ltd. to sell a large portion of Bridgeport's past-due accounts receivable. Bridgeport agrees to sell $1,830,000 of accounts receivable to Sarasota without recourse. Bridgeport's controller estimates that the fair value of uncollectible accounts is $164,000. Sarasota will charge Bridgeport 7% of the total receivables balance as a financing fee, and will withhold an initial amount of 8%. The transaction is treated as a sale. (a) Your answer is partially correct. Calculate the net proceeds and the gain or loss on the disposal of receivables to Sarasota Financing Ltd. Net proceeds Loss on disposal of receivables 1555500 1391500 SUPPORT
The controller for Ayayai Corporation has reached an agreement with Whispering Winds Financing Ltd. to sell a large portion of Ayayai's past-due accounts receivable. Ayayai agrees to sell $1,800,000 of accounts receivable to Whispering Winds with recourse. Ayayai's controller estimates that the fair value of Ayayai's liability to pay Whispering Winds for uncollectible accounts is $161,000. Whispering Winds will charge Ayayai 7% of the total receivables balance as a financing fee, and will withhold an initial amount of 8%. (a) Your answer is partially correct. Calculate the net proceeds and the gain or loss on the disposal of receivables to Whispering Winds Financing Ltd. Net proceeds Loss LA LA on disposal of receivables $ 1530000 126000
A Crest Textiles factors $40,000 of accounts receivable on a with recourse basis. The Factor agrees to provide financing based on these receivables, but imposes a 10% one-time fee. In addition, the transferor and transferee agree that $3,000 of sales returns and allowances (adjustments) can be expected from these accounts. Further, Crest Textiles determines that this recourse obligation has a fair value of $5,000. What is the loss or expense to be recorded by the transferor?
On January 31st, 2021, X Co. transfers $400,000 in receivables to Cater Finance with recourse. Cater charges a fee of 4% of the Account Receivable. X estimates a $3,000 recourse liability. Cater will immediately remit 90% of the factored receivables to X, and retain 10%. When Cater collects the remaining receivables, it remits the amount, less the fee, to X. X estimates that the fair value of the final 10% of the receivables is $25,000. X will record a Loss on Sale of Receivables of 34,000 9,000 25,000 40,000
On April 1, 2020, Super Enterprises sold $750,000 of accounts receivable to Convenience Factors, Inc. on a basis with recourse basis. The recourse obligation has a fair value of $9,000. Super Enterprises will continue to manage the customer accounts, including their collection. Super Enterprises estimates this obligation has a liability value of $12,500. Convenience Factors assesses a finance charge of 4% of the amount of accounts receivable and retains an amount equal to 5% of accounts receivable. Required: a) Assume Super Enterprises follows ASPE and the control of receivables has been given up to Convenience Factors. Prepare the journal entry required on Super's books on April 1, 2020. b) Assume Super Enterprises follows IFRS, prepare the journal entry required on Super's books on April 1, 2020. (Show all supporting calculations)
Furman Corporation entered into an assignment agreement with a finance company whereby Furman would be advanced 80% of all accounts assigned, minus a $2,000 service charge. The assignment does not meet the conditions for a sale and should be accounted for as a secured borrowing. During the year, $300,000 of accounts receivable were assigned, $220,000 collections were made on outstanding assigned accounts, and $210,000 was remitted to the finance company. This remittance included interest charges of $2,100. Sales returns and allowances on assigned accounts amounted to $5,000. Required: 1. Prepare the journal entries necessary to record the preceding information. 2. Show how the preceding information would be reported on Furman’s year-end balance sheet (assume the note payable is short-term).
Mountain High Ice Cream Company reports under IFRS. Mountain High transferred $70,000 of accounts receivable to the Prudential Bank. The transfer was made with recourse. Prudential remits 80% of the factored amount to Mountain High and retains 20% to cover sales returns and allowances. When the bank collects the receivables, it will remit to Mountain High the retained amount (which Mountain estimates has a fair value of $6,000). Mountain High anticipates a $4,000 recourse obligation. The bank charges a 1% fee (1% of $70,000), and requires that amount to be paid at the start of the factoring arrangement. Mountain High has transferred control over the receivables, but determines that it still retains substantially all risks and rewards associated with them. Required: Prepare the journal entry to record the transfer on the books of Mountain High, considering whether the sale criteria under IFRS have been met. Note: If no entry is required for a transaction/event, select "No journal entry…
Binsford, Inc., sells $175,000 of its accounts receivable ($172,000 net of the allowance for credit losses) to Upshaw Finance with recourse. Upshaw immediately remits cash equal to 90% of the gross receivable amount and retains the remaining 10% to cover its factoring fee (equal to 4% of the gross amount of factored receivables) and any bad debts under the agreement's recourse provisions. Binsford estimates the fair value of the recourse obligation to be $4,000. Required: 1. Prepare the journal entry Binsford would make to record the factoring. 2. Prepare Binsford's journal entry to record any subsequent cash received from Upshaw Finance if Upshaw collects all of the factored receivables except for $2,500 resulting from a bad debt.
Japee, Inc. assigned P240,000 of its receivables to PJTC Finance company. A note payable was executed. The contract provided that PJTC would advance 85% of the gross amount of the receivables. The contract specified recourse and non-notification; therefore, Japee’s debtors continue to remit directly to it; the cash from customers is then remitted to the finance company. The cash remitted is first applied to the finance charges, with the remainder applied to the principal. During the first month, customers owing P164,000 paid cash, less sales returns and allowances of P6,400. The finance charge at the end of the first month was P1,400.How much is the disclosed equity in assigned accounts as of the end of the first month?
Logitech Corporation transferred $100,000 of accounts receivable to a local bank. The transfer was made without recourse. The local bank remits 85% of the factored amount to Logitech and retains the remaining 15%. When the bank collects the receivables, it will remit to Logitech the retained amount less a fee equal to 3% of the total amount factored. Logitech estimates a fair value of its 15% interest in the receivables of $11,000 (not including the 3% fee). What is the effect of this transaction on the company’s assets, liabilities, and income before income taxes?

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