On May 1, DXY, Inc. factored €800,000 of accounts receivable with a Finance Company on a with recourse (with guarantee) basis. Under the arrangement, DXY was to handle disputes concerning service, and the Finance Company was to make the collections, handle the sales discounts, and absorb the credit losses. The Finance Company 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. The journal entry required on DXY’s books on May 1 is …………..

a.

Cash ............................................................................................... 736,000

Due from Factor ............................................................................. 16,000

Interest Expense............................................................................... 48,000

Recourse Liability................................................................. 800,000

b.

Cash .................................................................. 736,000

Due from Factor .................................................................. 16,000

Loss on Sale of Receivables................................................. 48,000

Accounts Receivable.......................................... 800,000

c.

Cash ........................................................................................... 736,000

Loss on Sale of Receivables........................................................ 64,000

Accounts Receivable....................................................... 800,000

d.

Cash ........................................................................................... 736,000

Interest Expense........................................................................... 64,000

Notes Payable.................................................................. 800,000

e.

Cash ........................................................................................... 736,000

Interest Expense........................................................................... 64,000

Recourse Liability........................................................... 800,000