Factoring accounts rec.
on may 1, dexter, inc. factored $1,600,000 of accounts receivabl...
Business, 04.11.2019 22:31, salinasroel22
Factoring accounts rec.
on may 1, dexter, inc. factored $1,600,000 of accounts receivable with quick finance on a without recourse basis. under the arrangement, dexter was 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 of 6% of the total accounts receivable factored and retained an amount equal to 2% of the total receivables to cover sales discounts.
instructions (a) prepare the journal entry required on dexter's books on may 1.
(b) prepare the journal entry required on quick finance’s books on may 1.
(c) assume dexter factors the $1,600,000 of accounts receivable with quick finance on a with recourse basis instead. the recourse provision has a fair value of $28,000. prepare the journal entry required on dexter’s books on may 1
(d) explain the main advantage and disadvantage of selling recievables (1) without recourse and (2) with recourse
Answers: 3
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