Chapter 8, Problem 8.9E

(a)

To determine

Accounts receivable:

Accounts receivable refers to the amounts to be received within a short period from the customers, upon the sale of goods and services on account. In other words, accounts receivable are amounts customers owe to the business. Accounts receivable is an asset of a business.

Sale of receivables to a factor

A company can sell its accounts receivables to a factor before its maturity period. Since, the factor makes earlier payment and bears the risk of receivables, factor has the right to collect service charge from the seller of accounts receivables. After the maturity, factor collects the payment directly from the respective customer.

To prepare: The journal entry in the books of K appliances, to record the sale of the accounts receivables.

(b)

To determine

Credit Card Sales

Credit card is used by customer to buy products on credit. If the business allows the customers to buy the products through credit cards, then the sales are called as credit card sales.

To prepare: The journal entry in the books of Company F, to record the sales revenue of the merchandise.