4.On May 1, ABC Inc. factored $1,600,000 of accounts receivable with ZZZ Finance Company on a without
Question:
4.On May 1, ABC Inc. factored $1,600,000 of accounts receivable with ZZZ Finance Company on a without recourse basis. Under the arrangement, ABC is to handle disputes concerning service, and ZZZ Finance is to make the collections, handle the sales discounts, and absorb the credit losses.
ZZZ 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.Using the attached T-account template, and pre pare the entry required in ABC's general ledger on May 1.
b.Using the second attached T-account for this problem, pre pare the journal entry required on ZZZ Finance's general ledger on May 1.
c.Explain the main advantage and disadvantage of selling receivables (1) without recourse and (2) with recourse.
4. On May 1, ABC Inc. factored $1,600,000 of accounts receivable with ZZZ Finance Company on a without recourse basis. Under the arrangement, ABC is to handle disputes concerning service, and ZZZ Finance is to make the collections, handle the sales discounts, and absorb the credit losses. ZZZ 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. b. Using the attached T-account template, and prepare the entry required in ABC's general ledger on May 1. Using the second attached T-account for this problem, prepare the journal entry required on ZZZ Finance's general ledger on May 1. c. Explain the main advantage and disadvantage of selling receivables (1) without recourse and (2) with recourse. No. 4a ABC = ASSETS LIABILITIES + EQUITY Non-current Assets Current Assets Property, Plant & Equipment Investments Intangible Assets/Other Current Liabilities Non-Current Liabilities Contributed Capital Earned Capital Accumulated OCI No. 4b ZZZ = ASSETS LIABILITIES + EQUITY Non-current Assets Current Assets Property, Plant & Equipment Investments Intangible Assets/Other Current Liabilities Non-Current Liabilities Contributed Capital Earned Capital Accumulated OCI Expert Answer:
