NIKE is considering transferring $435,000 of their accounts receivable to a financial institution on June 30, 2018.
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Question:
NIKE is considering transferring $435,000 of their accounts receivable to a financial institution on June 30, 2018. The financial institution will charge a financing fee equal to 10% of the gross receivables. A total of $16,000 of bad debts, already included in the current allowance for doubtful accounts, is associated with these accounts receivable. The transfer is recourse, on a notification basis, and the financing company does not have the right to re-sell the accounts receivable without the permission of NIKE Inc.
The company has asked you to provide the journal entry(s) to record the transfer of the accounts receivable should they decide to move forward.
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