On May 1, Dexter, Inc. factored $2,500,000 of accounts receivable with Quick Finance on a with recourse basis. The recourse provision has a fair value of $50,000. Under the arrangement, Dexter was to handle disputes concerning service, and Quick Finance was to make the collections, handle the sales discounts, and absorb the credit losses. Quick Finance assessed a finance charge of 5% of the total accounts receivable factored and retained an amount equal to 3% of the total receivables to cover sales discounts.

Instructions

(a) Prepare the journal entry required on Dexter's books on May 1.

(b) Prepare the journal entry required on Quick Finances books on May 1.

ASAP