Hogan Company uses the net method of accounting for sales discounts. Hogan offers trade discounts to various groups of buyers. On August 1, 2021, Hogan factored some accounts receivable on a without recourse basis. Hogan incurred a finance charge. Hogan also has some notes receivable bearing an appropriate rate of interest. The principal and total interest are due at maturity. The notes were received on October 1, 2021, and mature on September 30, 2022. Hogans operating cycle is less than one year.

1a. What is the rationale for the amount recorded as sales under the net method?

1b. Using the net method, describe any effect on Hogans sales revenues and net income when customers do not take the sales discounts.

2. Describe the effect trade discounts have on the amount recorded as sales revenue and accounts receivable

3. Explain why Hogan should or shouldn't decrease accounts receivable to account for the receivables factored on August 1, 2021.

4. Explain the reasoning for the classification of the interest-bearing notes receivable as current or non-current in its December 31, 2021, balance sheet.