On May 1,Sheffield, Inc. factored $2,016,000of accounts receivable with Quick Finance on a without recourse basis. Under the arrangement,Sheffieldwas 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 of6% of the total accounts receivable factored and retained an amount equal to2% of the total receivables to cover sales discounts.

Prepare the journal entry required onSheffield's books on May 1

Prepare the journal entry required on Quick Finance's books on May 1.

AssumeSheffieldfactors the $2,016,000of accounts receivable with Quick Finance on awithrecourse basis instead. The recourse provision has a fair value of $35,280. Prepare the journal entry required onSheffield's books on May 1.