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Ayayai Incorporated factored $135,100 of accounts receivable with Pina Factors Inc. on a without-recourse basis. Pina...



Ayayai Incorporated factored $135,100 of accounts receivable with Pina Factors Inc. on a without-recourse basis. Pina assesses a 3% finance charge of the amount of accounts receivable and retains an amount equal to 7% of accounts receivable for possible adjustments.

Prepare the journal entry for Ayayai Incorporated and Pina Factors to record the factoring of the accounts receivable to Pina. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.)

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Expert Solution

  • Ayayai Journal Entry

Date

Account title and explanation

Debit

Credit

Cash

(135,100 – 3%*135,100 – 7%*135,100)

                 $121,590

Loss on Sale of Receivable ($135,100*3%)

                            $4,053

Due from Factor

(Pina Factor Inc.) ($135,100*7%)

                            $9,457

             Accounts Receivable

$135,100

(Entry to record sale of Receivable)

Pina Factor Inc's Journal Entry

Date

Account title and explanation

Debit

Credit

Accounts Receivable

$135,100

Financing Revenue

$    4,053

Due to Ayayai Inc.

$    9,457

Cash

$121,590

(Entry to record purchase of receivable)

ekkarill92 answered 2 years ago
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