Finney Fabrics Frequently Factors Its Accounts Receivable

Essay

Finney Fabrics frequently factors its accounts receivable.On March 15,2016,Finney sold without recourse $400,000 of these receivables to a factor.The factoring agreement requires Finney to be responsible for any sales returns and cash discounts taken by customers upon payment of the factored receivables.The factor assessed a finance charge of 5% on the gross amount of the factored receivables and held back an additional 4% to cover sales discounts,returns,and allowances.During 2016,customers returned merchandise associated with those receivables with a gross value of $5,000.The factor collected the remaining amount of the factored receivables,minus the 2% discount on 94% of the collected receivables.On June 10,the factor returned the balance owed to Finney.
Prepare Finney's journal entry to record
a.the sale of the receivables on March 15,2016;
b.the receipt of cash on June 10,2016.