Question 3

Martinez Corporation factors $271,500of accounts receivable with Kathleen Battle Financing, Inc. on a with recourse basis. Kathleen Battle Financing will collect the receivables. The receivables records are transferred to Kathleen Battle Financing on August 15, 2017. Kathleen Battle Financing assesses a finance charge of2% of the amount of accounts receivable and also reserves an amount equal to4% of accounts receivable to cover probable adjustments.

(b)Assume that the conditions are met for the transfer of receivables with recourse to be accounted for as a sale. Prepare the journal entry on August 15, 2017, for Martinez to record the sale of receivables, assuming the recourse liability has a fair value of $3,170.(If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.)

Date

Account Titles and Explanation

Debit

Credit

Aug. 15, 2017