Question

**THE AMOUNTS ARE NOT MISSING. THEY ARE IN THIS PARAGRAPH. THE GENERAL LEDGER IS JUST SHOWING YOU THE OPTIONS FOR JOURNAL ENTRIES**

Inder Corporation is experiencing a temporary cash shortage and decides to transfer a group of its accounts receivable to Newton Company on March 22. Inder does not normally transfer its receivables. Newton accepts $80,000 of Inder’s accounts receivable, remits 90% of the accounts receivable transferred, and charges a 16% commission on the gross amount of the transferred receivables. Title to the receivables is transferred to Newton, and Newton has the right to assign, pledge, or sell the receivables. During the period, sales returns and allowances on transferred accounts amounted to $1,500.

	Required:
1.	Prepare all the journal entries necessary by Inder to record the preceding information assuming the transfer was without recourse.
2.	Prepare all the journal entries necessary by Inder to record the preceding information assuming the transfer was with recourse and the recourse obligation had an estimated fair value of $4,500.
3.	Assume that Inder uses IFRS. How would your answers to Requirements 1 and 2 change?

CHART OF ACCOUNTS
Inder Corporation
General Ledger
ASSETS 111 Cash 121 Accounts Receivable 123 Receivable from Factor 141 Inventory 152 Prepaid Insurance 181 Equipment 198 Accumulated Depreciation LIABILITIES 211 Accounts Payable 215 Recourse Liability 226 Return Liability 231 Salaries Payable 250 Unearned Revenue 261 Income Taxes Payable EQUITY 311 Common Stock 331 Retained Earnings	REVENUE 411 Sales Revenue EXPENSES 500 Cost of Goods Sold 511 Insurance Expense 512 Utilities Expense 521 Salaries Expense 532 Bad Debt Expense 540 Interest Expense 541 Depreciation Expense 559 Miscellaneous Expenses 601 Loss from Sale of Receivables 910 Income Tax Expense

General Journal information

Answer 1

Answer-1:

Transfer without Recourse:
Account Title	Debit ($)	Credit ($)
Cash	59,200
Receivable from factor ($80,000 × 10%)	8,000
Loss from sale of receivable ($80,000 × 16%)	12,800
Account receivable		80,000

Answer-2:

Transfer with Recourse:
Account Title	Debit ($)	Credit ($)
Cash	54,700
Receivable from factor ($80,000 × 10%)	8,000
Loss from sale of receivable [($80,000 × 16%) + $4,500]	17,300
Account receivable		80,000
Recourse liability		4,500

Answer-3:

(i) Transfer without recourse: Since, Inder transfers all the risks and rewards resulting from the receivables to the factoring company, Inder will derecognize the receivables fully, because the derecognition criteria in IFRS 9 are met. Hence, Account receivable will be credited for $80,000

(ii) Transfer with recourse: Since, Inderretains some risks resulting from the receivables to the factoring company, Inder will keeps the receivables in the balance sheet, because the derecognition criteria in IFRS 9 are not met. Hence, The amount received from factoring company is recognized as a liability i.e. Refund liability is credited instead of Account receivable for $80,000.