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Prepare the journal entry required on Quick Finances books

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Reference no: EM132549928

Question - On May 1, Dennis, Inc. factored €800,000 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.

Required -

(a) Prepare the journal entry required on Dennis's books on May 1.

(b) Prepare the journal entry required on Quick Finance's books on May 1.

(c) Assume Dennis factors the €800,000 of accounts receivable with Quick Finance on a with recourse basis instead. Prepare the journal entry required on Dennis's books on May 1.

(d) How does assigning accounts receivable help companies improve their cash flow situation?

Reference no: EM132549928

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