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Margrath company has an operating cycle of less than one year and provides credit term for all its customers. on April 1, 2018, the company

Margrath company has an operating cycle of less than one year and provides credit term for all its customers. on April 1, 2018, the company faced, with recourse, some of its accounts recoverable. migrate transferred the receivables to financial institution, and will have no further association with the receivables.

Magrath uses the allowance method to account for uncollectible and other accounts previously written off as uncollectible were collected.

Required:

  1. How should migrath account for and report the accounts receivable factored on April 1,2018? why is this accounting treatment appropriate?
  2. How should migrath account for the collection of the accounts previously written off as uncollectible?
  3. What are the two basic approaches to estimating uncollectible accounts under the allowance method? what is the rationale for each approach?

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