Halen Company factored $50,000 of its accounts receivable with recourse.The factor retained 8% for sales adjustments and charged $3,000 as a financing fee.For simplicity,assume the estimated and actual amounts of the following items are equal: Sales adjustments $2,500
Uncollectible accounts 500
Assume the transfer is recorded as a sale by Halen Company.What is the loss or financing expense to be recognized on the transfer?

Question

Quizplus · Accepted Answer

The financing expense is the $3,000 fee charged by the factor. The sales adjustments and uncollectible accounts are covered by the 8% retention, so they do not contribute to the loss or financing expense.

Halen Company Factored $50,000 of Its Accounts Receivable with Recourse