Problem -
On May 1st, P & P factored $80,000 of its accounts receivable to the Last Resort Finance Company. The finance company charged P & P a 5 percent factor fee and withheld another 5 percent for returns and allowances and sales discounts.
Required:
a. Prepare the required entries on May 1st for P & P assuming the receivables were factored without recourse.
b. Prepare the required entries on May 1st for P &P assuming the receivables were factored with recourse. P & P accepts responsibility for uncollectible accounts estimated at $2,000.