E7-18 (L06) (Transfer of Receivables with Recourse) Beyonc Corporation factors $175,000 of accounts receivable with Kathleen Battle

E7-18 (L06) (Transfer of Receivables with Recourse) Beyoncé Corporation factors $175,000 of accounts receivable with Kathleen Battle Financing, Inc. on a with recourse basis. Kathleen Battle Financing will collect the receivables. The receivables records are transferred to Kathleen Battle Financing on August 15, 2017. Kathleen Battle Financing assesses a finance charge of 2% of the amount of accounts receivable and also reserves an amount equal to 4% of accounts receivable to cover probable adjustments.
Instructions

(a) What conditions must be met for a transfer of receivables with recourse to be accounted for as a sale?

(b) Assume the conditions from part

(a) are met. Prepare the journal entry on August 15, 2017, for Beyoncé to record the sale of receivables, assuming the recourse obligation has a fair value of $2,000.