Detailed Answer
(b) A sale of receivables with recourse is recorded using a financial components approach because the seller has a continuing involvement. Under this approach the seller would reduce receivables, recognize assets obtained and liabilities incurred, and record gain or loss. The entry would be
Cash $365,260
Factor’s holdback 20,000
Loss 26,740*
Accounts receivable $400,000
Recourse liability 12,000
* ($6,740 + $8,000 + $12,000)