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rrajan
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| Posted: 14 Oct 2009 at 19:38 | IP Logged
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page 283 - Wiley FAR 2009 - Interests that continue to be held
Can somebody clarify how servicing asset was debited with 480
Given :
Receivable fair value - 16,500
Receivable book value - 15,000
Servicing asset - 700
Seller sales 80% of receivables
Journal entry is
Cash Dr. 13,200
Servicing asset Dr. 480
Receivables - Cr. 12,000
Gain - Cr. 1,650
Thanks in advance
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lovethepirk
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| Posted: 20 Oct 2009 at 13:18 | IP Logged
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going to take a look here in a second I am almost to that page. On page 280 right now.
Hey are you studying this book in order? When are you taking the test?
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rrajan
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| Posted: 20 Oct 2009 at 22:26 | IP Logged
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yes it starts from page 280 and my doubt is in page 283.
unfortunately, tomorrow is my test date
__________________
Rajan
Aim, Focus, Win
Exams Done!!!
Next - Ethics on the way
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lovethepirk
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rrajan,
hope your test goes well.
I hope there is an error in the text cause I am lost, hehe...
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CPA24
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Just found this forum, I know it is 2 months late!
You have to add the fair value of the receivable + the fair value of the servicing asset.
16,500 + 700 = 17,200.
The amount of the fair value that is allocated to the servicing asset is 4%:
700 divided by 17,200 = 4%.
The question says that the seller sold 80 % of its receivables that had a 15,000 book value. That means that 12,000 (BV) were sold.
You then have to use the a fair value allocation above to determine the amount of the book value that should be allocated to the receivables sold and the servicing asset:
12,000 book value * 96% alloc = 11,520
12,000 book value * 4 % alloc (to serv. asset) = 480.
I hope this helps, I am not very good at explaining things!
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Topic: FAR 2009 Weily Current assets - Page 283
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