Sheffield Corp

Accounting Nov 03, 2020

Sheffield Corp. factors $7400000 of its accounts receivables with recourse for a finance charge of 5%. The finance company retains an amount equal to 10% of the accounts receivable for possible adjustments. Sheffield estimates the fair value of the recourse liability at $203000. What would be recorded as a gain (loss) on the transfer of receivables?

Expert Solution

Computation of Gain or Loss on transfer of receivables:

Loss = Accounts Receivable*Finance Charge + Recourse Liability

= $7,400,000*5%+$203,000

= $370,000+$203,00

Loss = $573,000

So, Loss on transfer of receivables is $573,000.

Archived Solution

Unlocked Solution

You have full access to this solution. To save a copy with all formatting and attachments, use the button below.

Already a member? Sign In

Important Note: This solution is from our archive and has been purchased by others. Submitting it as-is may trigger plagiarism detection. Use it for reference only.

For ready-to-submit work, please order a fresh solution below.

Or get 100% fresh solution

Get Custom Quote