1. Transfer of Receivables without Recourse SEK Corp. factors $400,000 of accounts receivable with Mays Finance Corporation on a without recourse basis on July 1, 2010. The receivables records are transferred to Mays Finance, which will receive the collections. Mays Finance assesses a finance charge of 11⁄2% of the amount of accounts receivable and retains an amount equal to 4% of accounts receivable to cover sales discounts, returns, and allowances. The transaction is to be recorded as a sale.
(a) Prepare the journal entry on July 1, 2010, for SEK Corp. to record the sale of receivables without recourse.
(b) Prepare the journal entry on July 1, 2010, for Mays Finance Corporation to record the purchase of receivables without recourse.