BU387 Lecture Notes - Lecture 11: Finance Charge, Accounts Receivable
Document Summary
On may 1, abc, ltd. factored ,000 of accounts receivable with xyz finance on a without recourse basis. Under the arrangement, abc was to handle disputes concerning service, and xyz was to make the collections, handle the sales discounts, and absorb the credit losses. Xyz assessed a finance charge of 6% of the total accounts receivable factored and retained an amount equal to 2% of the total receivables to cover sales discounts. Instructions: (a) prepare the journal entry required on abc"s books on. May 1. (b) prepare the journal entry required on xyz"s books on. May 1. (c) assume the factoring was on a with recourse basis instead. The recourse provision has a fair value of.