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At the end of June, the Marquess Company factored $200,000 in accounts receivable with Homemark Finance
At the end of June, the Marquess Company factored $200,000 in accounts receivable with Homemark Finance. Homemark charges a fee of 3% of receivables factored. During July, $150,000 of the factored receivables are collected. If the transfer were made with recourse but is still accounted for as a sale, what amount of loss on sale of receivables would the company record in June assuming the estimated recourse liability is $2,000? And explain why choose that.
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$6,500
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$8,000
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$4,000
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Zero.
Expert Solution
Answer:$8,000
Loss on sale of Receivables = Factored Accounts Receivable x Factor fees rate = 200000 x 3% = 6000
The recourse liability would add a credit of $2,000 which would increase the loss from $6,000 to $8,000.
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