60.1K

Verified Solution

Link Copied!

On June 30, 2024, Figaro Fixtures was considering alternatives to bolster its cash position. Option One called for transferring $500,000 in accounts receivable to Wagner Finance Company without recourse for a 5% fee. Option Two calls for Figaro to transfer the $500,000 in receivables to Wagner with recourse. Wagner's charges a 4% fee for receivables factored with recourse. Option Two meets the conditions to be considered a sale, but Figaro estimates a $4,000 recourse liability. Under either option, Wagner will immediately remit 90% of the factored receivables to Figaro, and retain 10%. When Wagner collects the remaining receivables, it remits the amount, less the fee, to Figaro. Figaro estimates that the fair value of the final 10% of the receivables is $30,000. When Wagner Finance collects the receivables, it wil remit to Figaro the retained amount, less the factoring fee for both options.

Required:		16 points
1. Prepare any necessary journal entry or entries if receivables are factored under Option One.
2. Prepare any necessary journal entry or entries if receivables are factored under Option Two.

Date	Accounts	Debit	Credit

Answer & Explanation Solved by verified expert

See Answer