SYKES Corp. factors $100,000 of accounts receivable with KTT Finance Corporation on a without recourse basis on July 1, 2012. The receivables records are transferred to KTT Finance, which will receive the collections. KTT Finance assesses a finance charge of 2% of the amount of accounts receivable and retains an amount equal to 5% of accounts receivable to cover sales discounts, returns, and allowances. The transaction is to be recorded as a sale.
Instructions:
(a) Prepare the journal entry on July 1, 2012, for SYKES Corp. to record the sale of receivables with-out recourse.
(b) Prepare the journal entry on July 1, 2012, for KTT Finance Corporation to record the purchase of receivables without recourse.