Finney Fabrics frequently factors its accounts receivable. On March 15, 2016, Finney sold without recourse...
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Accounting
Finney Fabrics frequently factors its accounts receivable. On March 15, 2016, Finney sold without recourse $400,000 of these receivables to a factor. The factor assessed a finance charge of 5% on the gross amount of the factored receivables and held back an additional 4% to cover potential bad debts.
(a) Prepare the necessary journal entry for the factoring, assuming that the receivables are factored without recourse.
(b) Prepare the necessary journal entry for the factoring, assuming that the receivables are factored with recourse and the recourse liability has an estimated value of $7,000.
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