On December 1, 2020, Snow Unlimited Resorts, Inc. factored $400,000 of accounts receivable with Fast Eddies Overnight Cash Quick Finance Company on a without recourse basis. Under the arrangement, Snow Unlimited was to handle any issues concerning disputed billings.

Fast Eddie was to make the collections, and absorb any credit losses for uncollectible accounts. Fast Eddieassessed a finance charge of 6.00% of the total accounts receivable factored and retained an amount equal to 12% of the total receivables to cover any disputed billings.

Instructions

(a) Prepare the journal entry required on the books of Snow Unlimited Resorts for the December 1, 2020 transaction.

(b) Prepare the journal entry required on the books of Fast Eddies Overnight Finance for the December 1, 2020 transaction.

(c) Assume Snow Unlimited Resorts, Inc. had factored the $400,000 of accounts receivable with Fast Eddies Overnight Finance on a with recourse basis instead. The recourse provision has a fair value of $15,000. Prepare the journal entry required on the books of Snow Unlimited Resorts for the December 1, 2020 transaction with recourse.

(d) Prepare the entry on Snow Unlimited Resorts, Inc. books if a client disputed a billing and was given a credit adjustment on their account in the amount of $6,000.

(e) Prepare the entry on Fast Eddies books after being notified of the credit adjustment. Note: the account was included in the total accounts factored with Fast Eddies Overnight Finance and was still outstanding (unpaid) at the time of the credit adjustment.