Digitex Inc.factored $50,000 of its accounts receivable with recourse.The factor retained 8% for sales adjustments and charged $3,000 as a financing fee.Estimated and actual amounts are as follows: $\begin{array}{lr}
\text { Sales adjustments } & \$ 2,500 \
\text { Uncollectible accounts } & 500
\end{array}$ Assume the transfer is recorded as a sale by Digitex.What is the loss or financing expense to be recognized on the transfer?

Question

Quizplus · Accepted Answer

The financing fee of $3,000 is the loss or financing expense recognized on the transfer. The sales adjustments and uncollectible accounts are covered by the 8% retention and do not affect the loss recognized.

Digitex Inc Sales adjustments $2,500 Uncollectible accounts 500\begin{array}{lr}\text { Sales adjustments } & \$ 2,500 \\\text { Uncollectible accounts } & 500\end{array} Sales adjustments Uncollectible accounts ​$2,500500​

Digitex Inc $\begin{array}{lr}\text { Sales adjustments } & \$ 2,500 \\\text { Uncollectible accounts } & 500\end{array}$