Kimmel Company uses the net method of accounting for sales discounts. Kimmel also offers trade discounts to various groups of buyers. On August 1, 2017, Kimmel sold some accounts receivable on a without recourse basis. Kimmel incurred a finance charge. Kimmel 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, 2017, and mature on September 30, 2019. Kimmels operating cycle is less than one year.

1. What is the effect of trade discounts on sales revenues and accounts receivable? Why?

2. How should Kimmel account for the accounts receivable factored on August 1, 2017? Why?