Question 5

Company Z factors $200,000 of accounts receivable with Company A. The finance charge is 2%

of accounts receivable. Company A retains an amount equal to 3% of accounts receivable. Record

the journal entries for both Company Z and Company A if the sale was on a (1) without recourse

basis and again on a (2) with recourse basis. Assume that Company Z estimates a recourse

obligation with a fair value of $2,000.