Miles to Go is a travel agency specializing in tours to Africa and Australia.Miles to Go has $2,400,000 in accounts receivable.During 2011, miles to Go enters into a factoring arrangement with Fox Factors to factor 75% of their receivables.The agreement with Fox calls for a services charge of 2% of the amount of receivables sold.The effects on the statement of financial position for Miles to Go of factoring its receivables includes a(n)

Question

Quizplus · Accepted Answer

Miles to Go factors 75% of $2,400,000, which is $1,800,000. The service charge is 2% of $1,800,000, which is $36,000. Therefore, the increase in cash is $1,800,000 - $36,000 = $1,764,000.

Miles to Go Is a Travel Agency Specializing in Tours