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Arness Woodcrafters sells $300,000 of receivables to Commercial Factors, Inc. on a with recourse basis. Commercial...

Arness Woodcrafters sells $300,000 of receivables to Commercial Factors, Inc. on a with recourse basis. Commercial assesses a finance charge of 6% and retains an amount equal to 3% of accounts receivable. Arness estimated the fair value of the recourse obligation to be $8,000. Prepare the journal entry for (a) Arness and (b) Commercial Factors

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S.No. Account Titles Debit Credit
1 Cash $300000– [$300000 X (.06 + .03)] $     273,000
Due from Factor ($300000 X .03) $         9,000
Loss on Sale of Receivables*** $       26,000
Accounts Receivable $     300,000
Recourse Obligation $         8,000
Calculation-
Loss on Sale of Receivables
***($300000 X .06) + $8,000 = $26,000
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