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Question 5 SEK Group factors $400,000 of accounts receivable with Mays Finance without guaranteeing any payment for possible credit losses (without recourse) on July 1, 2019. The receivables records are transferred to Mays Finance, which will receive the collections. Mays Finance assess a finance charge of 1.5% of the amount of account receivable and retains an amount equal to 4% of accounts receivable to cover sales discounts, returns, and allowances.

Question 5 SEK Group factors $400,000 of accounts receivable with Mays Finance without guaranteeing any payment for possible credit losses (without recourse) on July 1, 2019. The receivables records are transferred to Mays Finance, which will receive the collections. Mays Finance assess a finance charge of 1.5% of the amount of account receivable and retains an amount equal to 4% of accounts receivable to cover sales discounts, returns, and allowances.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question 5 SEK Group factors $400,000 of accounts receivable with Mays Finance without guaranteeing any payment for possible credit losses (without recourse) on July 1, 2019. The receivables records are transferred to Mays Finance, which will receive the collections. Mays Finance assess a finance charge of 1.5% of the amount of account receivable and retains an amount equal to 4% of accounts receivable to cover sales discounts, returns, and allowances. Instructions a. Prepare the journal entry on July 1, 2019 for SEK Group to record the sale of receivables without recourse. b. Prepare the journal entry on July 1, 2019, for Mays Finance to record the purchase of receivables without recourse.
Transcribed Image Text:Question 5 SEK Group factors $400,000 of accounts receivable with Mays Finance without guaranteeing any payment for possible credit losses (without recourse) on July 1, 2019. The receivables records are transferred to Mays Finance, which will receive the collections. Mays Finance assess a finance charge of 1.5% of the amount of account receivable and retains an amount equal to 4% of accounts receivable to cover sales discounts, returns, and allowances. Instructions a. Prepare the journal entry on July 1, 2019 for SEK Group to record the sale of receivables without recourse. b. Prepare the journal entry on July 1, 2019, for Mays Finance to record the purchase of receivables without recourse.
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