On July 1, Ashland, Inc. factored $800,000 of accounts receivable with Richmond Finance on a without recourse basis. Under the arrangement, Ashland was to handle disputes concerning service, and Richmond Finance was to make the collections, handle the sales discounts, and absorb the credit losses. Richmond Finance assessed a finance charge of 6% of the total accounts receivable factored and retained an amount equal to 2% of the total receivables to cover sales discounts.

a.Prepare the journal entry required in Ashland's accounting records on July 1.

b.Prepare the journal entry required on Richmond's accounting records on July 1.

c.Assume Ashland factored $800,000 of accounts receivable on a with recourse basis instead.The recourse liability had a fair value of $14,000.Prepare the journal entry required in Ashland's accounting records on July 1.

NOTE:In writing your journal entry, type DR for accounts to be debited and CR for accounts to be credited.For example:

DR Cash100

CRAccounts receivable100