Question - Transfer of Receivables with Recourse
Gringo Corporation factors $250,000 of accounts receivable with Winkler Financing, Inc. on a with recourse basis. Winkler Financing will collect the receivables. The receivables records are transferred to Winkler Financing on August 15, 2012. Winkler Financing assesses a finance charge of 2% of the amount of accounts receivable and also reserves an amount equal to 4% of accounts receivable to cover probable adjustments.
Assume the conditions from E7-16 (a) are met. Prepare the journal entry on August 15, 2012, for Gringo to record the sale of receivables, assuming the recourse obligation has a fair value of $3,000.