1.Disposition of Accounts Receivable

(a)ACC Corporation factors $250,000 of accounts receivable with Delgotto Financing, Inc. on a with recourse basis. Delgotto Financing will collect the receivables. The receivables records are transferred to Delgotto Financing on December 1, 2017. Delgotto 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. Assume this transaction qualifies as a sale with recourse. Prepare the journal entry on December 1, 2017, for Potter to record the sale of receivables, assuming the recourse obligation has a fair value of $2,000.

(b)BCC Consulting Company factors $360,000 of accounts receivable with Top5 Finance Corporation on a without recourse basis on July 1, 2017. The receivables records are transferred to Top5 Finance, which will receive the collections. Top5 Finance assesses a finance charge of 1.25% of the amount of accounts receivable and retains an amount equal to 3.5% of accounts receivable to cover sales discounts, returns, and allowances. Assume this transaction qualifies as a sale. Prepare the journal entry on July 1, 2017, for BCC Consulting Company to record the sale of receivables without recourse.