FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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**Journal Entry Preparation for Accounts Receivable Transaction**

Vaughn Incorporated sold $166,000 of accounts receivable to Gannon Factors Inc. on a with recourse basis. Gannon assesses a 2% finance charge of the amount of accounts receivable and retains an amount equal to 6% of accounts receivable for possible adjustments. Prepare the journal entries for Vaughn Incorporated and Gannon Factors to record the sale of the accounts receivable to Gannon, assuming that the recourse liability has a fair value of $9,100. *(Credit account titles are automatically indented when the amount is entered. Do not indent manually.)*

**Account Titles and Explanation**

| Vaughn Incorporated                                     | Debit | Credit |
|---------------------------------------------------------|-------|--------|
|                                                          |       |        |
|                                                          |       |        |
|                                                          |       |        |
|                                                          |       |        |

| Gannon Factors                                          | Debit | Credit |
|---------------------------------------------------------|-------|--------|
|                                                          |       |        |
|                                                          |       |        |
|                                                          |       |        |
|                                                          |       |        |

This table is meant for recording the necessary debits and credits for both Vaughn Incorporated and Gannon Factors based on the given transaction details. The finance charge and retention percentages, along with the recourse liability's fair value, need to be utilized to compute the correct figures for reporting in the accounting records.
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Transcribed Image Text:**Journal Entry Preparation for Accounts Receivable Transaction** Vaughn Incorporated sold $166,000 of accounts receivable to Gannon Factors Inc. on a with recourse basis. Gannon assesses a 2% finance charge of the amount of accounts receivable and retains an amount equal to 6% of accounts receivable for possible adjustments. Prepare the journal entries for Vaughn Incorporated and Gannon Factors to record the sale of the accounts receivable to Gannon, assuming that the recourse liability has a fair value of $9,100. *(Credit account titles are automatically indented when the amount is entered. Do not indent manually.)* **Account Titles and Explanation** | Vaughn Incorporated | Debit | Credit | |---------------------------------------------------------|-------|--------| | | | | | | | | | | | | | | | | | Gannon Factors | Debit | Credit | |---------------------------------------------------------|-------|--------| | | | | | | | | | | | | | | | | This table is meant for recording the necessary debits and credits for both Vaughn Incorporated and Gannon Factors based on the given transaction details. The finance charge and retention percentages, along with the recourse liability's fair value, need to be utilized to compute the correct figures for reporting in the accounting records.
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