If anyone could help explain how to do these problems and work maybe one or two of them out that would be amazing. My teacher left us to teach ourselves for this chapter and I'm completely lost on what to do with any of this information. Here are the problems:
1. 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?
2. Refer to the situation described in problem 1. Assuming that the sale criteria are not met, describe how Logitech would account for the transfer.
3. On June 30, 2013, the Esquire Company sold some merchandise to a customer for $30,000 and agreed to accept as payment a noninterest-bearing note with an 8% discount rate requiring the payment of $30,000 on March 31, 2014. The 8% is appropriate in this situation.
~Prepare journal entries to record the sale of merchandise (omit any entry that might be required for the cost of goods sold), the December 31, 2013 interest accrual, and the March 31, 2014 collection.
~What is the effective interest rate on the note?
4. On January 1, 2013, the Apex Company exchanged some shares of common stock it had been holding as an investment for a note receivable. The note principal plus interest is due on January 1, 2014. The 2013 income statement reported $2,200 in interest revenue from this note and a $6,000 gain on sale of investment in stock. The stock's book value was $16,000. the company's fiscal year ends on December 31.
~What is the note's effective interest rate?
~Reconstruct the journal entries to record the sale of the stock on January 1, 2013, and the adjusting entry to record interest revenue at the end of 2013. The company records adjusting entries only at year end.
5. Mountain High Ice Cream Company transferred $60,000 of accounts receivable to Prudential Bank. The transfer was made without recourse. Prudential remits 90% of the factored amount to Mountain high and retains 10%. When the bank collects the receivables, it will remit to Mountain High the retained amount (which Mountain estimates has a fair value of $5,000) less a 2% fee (2% of the total factored amount).
~Prepare the journal entry to record the transfer on the books of Mountain High assuming that the sales criteria are met.
Thank you in advance for the help. My teacher just decided to take a two day vacation and wasn't planning on going over any of this information.
1. 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?
2. Refer to the situation described in problem 1. Assuming that the sale criteria are not met, describe how Logitech would account for the transfer.
3. On June 30, 2013, the Esquire Company sold some merchandise to a customer for $30,000 and agreed to accept as payment a noninterest-bearing note with an 8% discount rate requiring the payment of $30,000 on March 31, 2014. The 8% is appropriate in this situation.
~Prepare journal entries to record the sale of merchandise (omit any entry that might be required for the cost of goods sold), the December 31, 2013 interest accrual, and the March 31, 2014 collection.
~What is the effective interest rate on the note?
4. On January 1, 2013, the Apex Company exchanged some shares of common stock it had been holding as an investment for a note receivable. The note principal plus interest is due on January 1, 2014. The 2013 income statement reported $2,200 in interest revenue from this note and a $6,000 gain on sale of investment in stock. The stock's book value was $16,000. the company's fiscal year ends on December 31.
~What is the note's effective interest rate?
~Reconstruct the journal entries to record the sale of the stock on January 1, 2013, and the adjusting entry to record interest revenue at the end of 2013. The company records adjusting entries only at year end.
5. Mountain High Ice Cream Company transferred $60,000 of accounts receivable to Prudential Bank. The transfer was made without recourse. Prudential remits 90% of the factored amount to Mountain high and retains 10%. When the bank collects the receivables, it will remit to Mountain High the retained amount (which Mountain estimates has a fair value of $5,000) less a 2% fee (2% of the total factored amount).
~Prepare the journal entry to record the transfer on the books of Mountain High assuming that the sales criteria are met.
Thank you in advance for the help. My teacher just decided to take a two day vacation and wasn't planning on going over any of this information.