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The controller for Culver Corporation has reached an agreement with Pronghorn Financing Ltd. to sell a large portion of Culver's past-due accounts receivable. Culver agrees to sell $1,850,000 of accounts receivable to Pronghorn without recourse. Culver's controller estimates that the fair value of Culver's liability to pay Pronghorn for uncollectible accounts is $166,000. Pronghorn will charge Culver 9% of the total receivables balance as a financing fee, and will withhold an initial amount of 10%. Calculate the net proceeds and the gain or loss on the disposal of receivables to Pronghorn Financing Ltd. Net proceeds Loss on disposal of receivables Account Titles and Explanation Cash Prepare the journal entry on the books of Culver Corporation to record the disposal of receivables to Pronghorn Financing Ltd. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.) Due from Factor Loss on Disposal of Receivables $ Accounts Receivable $ I Debit 166500 Credit U 1850000

The controller for Culver Corporation has reached an agreement with Pronghorn Financing Ltd. to sell a large portion of Culver's past-due accounts receivable. Culver agrees to sell $1,850,000 of accounts receivable to Pronghorn without recourse. Culver's controller estimates that the fair value of Culver's liability to pay Pronghorn for uncollectible accounts is $166,000. Pronghorn will charge Culver 9% of the total receivables balance as a financing fee, and will withhold an initial amount of 10%. Calculate the net proceeds and the gain or loss on the disposal of receivables to Pronghorn Financing Ltd. Net proceeds Loss on disposal of receivables Account Titles and Explanation Cash Prepare the journal entry on the books of Culver Corporation to record the disposal of receivables to Pronghorn Financing Ltd. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.) Due from Factor Loss on Disposal of Receivables $ Accounts Receivable $ I Debit 166500 Credit U 1850000

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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The controller for Culver Corporation has reached an agreement with Pronghorn Financing Ltd. to sell a large portion of Culver's past-due accounts receivable. Culver agrees to sell $1,850,000 of accounts receivable to Pronghorn without recourse. Culver's controller estimates that the fair value of Culver's liability to pay Pronghorn for uncollectible accounts is $166,000. Pronghorn will charge Culver 9% of the total receivables balance as a financing fee, and will withhold an initial amount of 10%. Calculate the net proceeds and the gain or loss on the disposal of receivables to Pronghorn Financing Ltd. Net proceeds Loss on disposal of receivables Account Titles and Explanation Cash Prepare the journal entry on the books of Culver Corporation to record the disposal of receivables to Pronghorn Financing Ltd. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.) Due from Factor Loss on Disposal of Receivables $ Accounts Receivable $ I Debit 166500 Credit JON! 1850000
Transcribed Image Text:The controller for Culver Corporation has reached an agreement with Pronghorn Financing Ltd. to sell a large portion of Culver's past-due accounts receivable. Culver agrees to sell $1,850,000 of accounts receivable to Pronghorn without recourse. Culver's controller estimates that the fair value of Culver's liability to pay Pronghorn for uncollectible accounts is $166,000. Pronghorn will charge Culver 9% of the total receivables balance as a financing fee, and will withhold an initial amount of 10%. Calculate the net proceeds and the gain or loss on the disposal of receivables to Pronghorn Financing Ltd. Net proceeds Loss on disposal of receivables Account Titles and Explanation Cash Prepare the journal entry on the books of Culver Corporation to record the disposal of receivables to Pronghorn Financing Ltd. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.) Due from Factor Loss on Disposal of Receivables $ Accounts Receivable $ I Debit 166500 Credit JON! 1850000
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