Recently, you have been hired by a local CPA firm, after passing the exam

Recently, you have been hired by a local CPA firm, after passing the exam. The partner has a client with questions about whether to sell his company’s receivables or to use the receivables as collateral for a loan. The client, Frank’s Furniture Inc., needs to raise cash quickly but is reluctant to take on more debt. The CEO of Frank’s Furniture has consulted with his bank who would be willing to factor $400,000 of Frank’s Furniture’s receivables. The bank wants to withhold 10% of the receivables to cover the discount the customers of Frank’s Furniture would be eligible to take. The bank would charge a 4% fee based on the $400,000 of receivables for factoring the receivables. The bank would be willing to loan the company $350,000 for 3 months if the $400,000 of receivables are used as collateral and would charge a 3% fee on the receivables and require a 6% interest payment.

Required: The partner has asked you to prepare a letter for his signature to the CEO, explaining the GAAP requirements for the transfer of receivables as a sale, rather than a loan.You explanations must be supported by the appropriate citations from the codification. Please indicate the  sections of the codification and summarize and explain and provide the citation from the codification. Additionally, the partner wants the memo to explain the different accounting implications of a sale versus a collateralized loan and propose the journal entries under both scenarios