Ames quartet inc. factors receivables with a carrying amount of $200,000 to joffrey company for $160,000 on a with recourse basis. the recourse provision has a fair value of $1,000. this transaction should be recorded as a sale. prepare the appropriate journal entry to record this transaction on the books of ames quartet inc.

Ames Quartet Inc          Debit            Credit

cash                               $160000

loss on sale                   $40000

Account receivable                            160000

recourse liability                                  1000

Explanation:

Factoring with recourse refers to a practice where a company sells it' s loan or receivable to a factor or another company for immediate cash. The factor is guaranteed an amount called ' Recourse' .