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(solution) This relates to Income Effects of Receivables Transactions.


This relates to Income Effects of Receivables Transactions. Sandburg Company requires additional cash for its business. Sandburg has decided to use its accounts receivable to raise the additional cash and has asked you to determine the income statement effects of the following in the contemplated transactions. On July 1, 2012 Sandburg assigned $400,000 of accounts receivable to Keller Finance Company. Sandburg received an advance form Keller of 80% of the assigned accounts receivable less a commission of 3% on the advance. Prior to December 31, 2012 Sandburg collected $220,000 on the assigned accounts receivable and remitted $232,720 to Keller, $12,720 of which represented interest on the advance from Keller. On December1, 2012 Sandburg sole $300,000 of net accounts receivable to Wunsch Company for $270,000. The receivables were sold outright on a without recourse basis. On December 21, 2012 an advance of $120,000 was received from First Bank by pledging $160,000 of Sandburgs accounts receivable. Sandburgs first payment to First Bank is due on January 30, 2013. Prepare a schedule showing the income statement effects for the year ended December 31, 2012 as a result of the above facts. I am having trouble with this problem on where to start to make it effective.

 


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