Question
Artic Inc. is having a hard time collecting its outstanding Accounts Receivables from its customers. Artic Inc. decides to factor $700,000 of its Accounts Receivables
Artic Inc. is having a hard time collecting its outstanding Accounts Receivables from its customers. Artic Inc. decides to factor $700,000 of its Accounts Receivables to Collection Co. on 1/1/20. Collection Co. assesses a finance charge of 5.85% of the factored Accounts Receivables, and retains an amount equal to 4.25% of the factored Accounts Receivables for probable adjustments.
**You may round your answers to the nearest dollar.
(A) If the factoring between Artic Inc. and Collection Co. is done without recourse what journal entry would Artic record in relation to the factoring on 1/1/20?
(B) Given the same set of facts as in (A) above (factoring is done without recourse), what journal entry would Collection Co. record in relation to the factoring on 1/1/20?
(C) If the factoring between Artic Inc. and Collection Co. is done with recourse what journal entry would Artic Inc. record in relation to the factoring on 1/1/20? Assume that any recourse obligation is deemed to have a fair market value of $25,000.
(D) Given the same set of facts as in (C) above (factoring is done without recourse), what journal entry would Collection Co. record in relation to the factoring on 1/1/20?
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