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Braun Company factors $300,000 of accounts receivable with Schick Factors Inc.on a without recourse basis.The receivables records are transferred to Schick Factors, which takes over full responsibility for collections.Schick assesses a finance charge of 4% and withholds an initial amount equal to 7% of the accounts receivable for returns and allowances.
-The loss on sale of receivables recorded by Braun is

Question

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The loss on sale of receivables is equal to the difference between the face amount of the receivables and the amount received from the factor. In this case, the face amount of the receivables is $300,000, and the amount received from the factor is $300,000 - (4% + 7%) * $300,000 = $279,000. Therefore, the loss on sale of receivables is $300,000 - $279,000 = $21,000.

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