1) On May 1, Sheffield, Inc. factored $2,016,000 of accounts receivable with Quick Finance on a without recourse basis. Under the arrangement, Sheffield was to handle disputes concerning service, and Quick Finance was to make the collections, handle the sales discounts, and absorb the credit losses. Quick Finance 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.

(a)

Prepare the journal entry required on Sheffield's books on May 1. (Credit account titles are automatically indented when the amount is entered. Do not indent manually.)

2)

Accounts receivable in the amount of $714,000 were assigned to the Fast Finance Company by Waterway, Inc., as security for a loan of $612,000. The finance company assessed a 4% finance charge on the face amount of the loan, and the note bears interest at 8% per year. During the first month, Waterway collected $397,800 on assigned accounts. This amount was remitted to the finance company along with one month's interest on the note. Make all the entries for Waterway Inc. associated with the transfer of the accounts receivable, the loan, and the remittance to the finance company. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. Round answers to 0 decimal places, e.g. 5,275.)