The December 31, 2014 balance in the Accounts Receivable account for Initech, Inc. is $354,000, made up of the following partitions:

Age of Accounts	A/R Balance	Estimated % of Uncollectibles
0-30 Days	162,000	1%
31-60 Days	145,000	5%
61-120 Days	21,000	20%
More than 120 Days	26,000	60%
	354,000

Based on prior experience, Initech estimates the percentage of total dollars from each group of receivables that will be uncollectible. For example, Initech estimates that 1.0% of all receivables outstanding between 0 and 30 days will be uncollectible.

Initechs Allowance for Uncollectible Accounts balance was $35,700 at January 1, 2014 and the firm wrote off $23,000 worth of accounts during 2014. The firm records the Provision for Bad Debt Expense on 12/31/2014.

Question 1:

Initrode Inc sells $55,000 of its customer receivables to DC Corp without recourse. DC Corp charges a 6% finance fee for this service (e.g., processing costs, time value of money).

REQUIRED:

1. What journal entry will be made by Initrode to record the loan?
2. How would the treatment differ if this sale was with a recourse obligation of $5,000?
3. Now, going back to 2.a, suppose this sale has a return provision. DC Corp will retain 4% to account for the possibility of sales returns. How does this effect the treatment of the sale? Record the new Journal Entry that Initrode should make.

Question 2:

Initrode Company pledges $125,000 of its customer receivables to DC Corp as security for a loan. DC Corp lends Initrode $110,000 in return and charges a 3% finance fee for this service.

REQUIRED:

1. Show the journal entry made by Initrode.
2. Describe the different effects on each of the financial statements that a secured borrowing like this one has, as oppose to a sale of the receivables in Question 2.