Recent news articles indicate that traditional retail outlets such as malls and big box stores are becoming less and less profit
2 answers:
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Answer:
Assets:
Cash (600,000x92%) I552000
Due from factor I18000
Accounts receivable D600000
Liabilities:
Recourse obligation I14400
Equity:
Loss on sale of receivable D44400
Explanation:
First, we have to calculate Loss on Sale of Receivable
Accounts receivable factored 600,000
Finance charge (8% -3%) 5%
Finance charge on receivables (600,000 x 5%) 30,000
Hold back (%) 3%
Due from factor (600,000 x 3%) 18,000
Recourse obligation (600,000 x 2.4%) 14,400
Loss on Sale of Receivable (30,000 + 14,400) 44,400
Now, we show the effect of factoring:
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Assets Liabilities Equity
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Cash (600,000x92%) I552000 Recourse obligation I14400 Loss on sale of receivable D44400
Due from factor I18000
Accounts receivable D600000
Hope this helps!
