Use the information presented in BE7-13 for Arness Woodcrafters but assume that the receivables were sold with a full guarantee for credit losses. Prepare the journal entry and discuss the effects on Arness’s financial statements.

Data From BE7-13

Arness Woodcrafters sells $250,000 of receivables to Commercial Factors, Inc. on a without guarantee basis. Commercial assesses a finance charge of 5% and retains an amount equal to 4% of accounts receivable. Prepare the journal entry for Arness to record the sale.