During the audit ofABCCompany for the year ended December 31,2017, you uncover the following two transactions affecting the company's receivables:

1)On October 1,2017,Acme Realty Co.gaveABCa 3-year,1%, $20,000 notetopurchase a tract of land fromABC. ABChad bought the land as an investment several years ago for $12,000.Interest payments on the note are due on September 30 of each year.

2)On December 28,2017,ABCfactored, on awithrecourse basis, $40,000 ofAccounts Receivable withMolinaFinance Company. Molinacharged a3% finance charge and withheld an additional4% to cover any possible adjustments.

ABCCompany made the following entries to record these transactions:

1)Notes Receivable20,000

Land12,000

Gain on Sale8,000

2)Cash37,200

Loss on Factoring1,200

Due from the Factor1,600

Accounts Receivable40,000

You decide to questionABC's controller about these transactions. The controller justifies these entries bystating the following regarding each of the two situations:

1)The note contains a provision for interest and,therefore, no special accounting is needed for the note.

2)MolinaFinance Company will collect the receivables. Therefore,ABCno longer owns the receivables and, as a result, the transaction must be a sale.

ABC's controller has held this position for many years and his reasoning for the accounting choices that have been made in each of these situations appears to be sound, or does it? What would you require as the proper accounting for these two transactions?Be sure to cite appropriate justification from the Accounting Standards Codification.