In a factoring of accounts receivable with recourse, which party bears (indicated by * in the answer alternatives) the cost of bad debts and sales adjustments? $$\begin{array} { | l | l | l | l | }
\hline &\text { } & \text {bad depts} &\text {sales adjuistments} \
\hline 1&\text { transferor } & *& * \
\hline 2 &\text { factor } & &* \
\hline &\text { transferor } & & * \
\hline 3& \text { factor } & * & \
\hline& \text { transferor} & *& \
\hline 4 &\text { factor } & *\
\hline
\end{array}$$

Question

In a factoring of accounts receivable with recourse, which party bears (indicated by * in the answer alternatives) the cost of bad debts and sales adjustments? $$\begin{array} { | l | l | l | l | } 
\hline  &\text {  } & \text {bad depts} &\text {sales adjuistments} \
\hline 1&\text { transferor } &  *& * \
\hline 2 &\text {  factor } & &* \
\hline &\text { transferor } & & * \
\hline 3& \text { factor  } & * & \
\hline& \text { transferor} & *&  \
\hline 4 &\text { factor } & *\
\hline
\end{array}$$

Quizplus · Accepted Answer

In factoring of accounts receivable with recourse, the factor (the party that purchases the receivables) has the right to recourse or demand payment from the seller (the party that sells the receivables) in case of bad debts or sales adjustments. Therefore, the seller bears the cost of bad debts and sales adjustments, not the factor.

In a Factoring of Accounts Receivable with Recourse, Which Party