Prepare journal entry required to be prepared by allan inc

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On June 1, 2019 Allan Inc. factored $400,000 of accounts receivable with an outside company (BKK Ltd.) on a without recourse basis. BKK assessed a finance charge of 4% of the total accounts receivable factored and retained an amount equal to 3% of the total receivables to cover sales discounts and allowances. Both companies follow ASPE.

Problem a) Prepare the journal entry required to be prepared by BKK Ltd. on June 1, 2019. Show details of all calculations

Problem b) Instead, assume Allan factors the $400,000 of accounts receivable with BKK on a with recourse basis. Under the arrangement, Allan Inc. was to deal with dissatisfied customers and complaints while the BKK was to make the collections, handle the sales discounts, and absorb the credit losses. The recourse provision has a fair value of $10,000. Prepare the journal entry required to be prepared by Allan Inc. on June 1, 2019. Show details of all calculations

Reference no: EM132766996

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