Prepare the journal entry for maddox to record the factoring

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Reference no: EM131908678

Problem

Maddox Company factored $80,000 of accounts receivable without recourse with Sun Bank on a notification basis. Sun Bank charged a factoring fee of 3% of the amount of receivables factored and withheld 10% of the amount factored to cover sales returns and allowances. Required:

a. Prepare the journal entry for Maddox to record the factoring.
b. Repeat, assuming the accounts were factored with recourse and the factoring meets the criteria to be treated as a sale. The fair value of the recourse liability was estimated to be $1,500

Reference no: EM131908678

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