Sale of receivables without recourse
Sparwood Manufacturing factored $240,000 of their accounts receivable to General Factor Corp., on a without recourse basis. The receivables are transferred to General Factor, who takes over the full responsibility of collection. General Factor charged a finance charge of 4% of the dollar value of the receivables, and withheld 5% of the receivable value.
Instructions
a) Prepare the general journal entry to reflect this transaction on Sparwood’s books.
b) Prepare the general journal entry to reflect this transaction on General Factor’s books.

Question

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The Answer of Sale of receivables without recourse
Sparwood Manufacturing factored $240,000 of their accounts receivable to General Factor Corp., on a without recourse basis. The receivables are transferred to General Factor, who takes over the full responsibility of collection. General Factor charged a finance charge of 4% of the dollar value of the receivables, and withheld 5% of the receivable value.
Instructions
a) Prepare the general journal entry to reflect this transaction on Sparwood’s books.
b) Prepare the general journal entry to reflect this transaction on General Factor’s books.

Sale of Receivables Without Recourse