Question

Peggy is in the business of factoring accounts receivable. Last year, she purchased a $30,000 account receivable for $25,000. This year, the account was settled for $25,000. How much loss can Peggy deduct and in which year?
a. $5,000 for the current year
b. $5,000 for the prior year and $5,000 for the current year.
c. $10,000 for the current year
d. None of the above

Answer 1

Answer:

The correct option is D

Explanation:

Accounts receivable is the balance amount of money is which due to a firm or business for goods or services that is delivered or used but the money is not yet paid by the customers.

So, last year, she has account receivable for $25,000 and current year, the account settled for $25,000. Therefore, there is no loss which means it is $0 in the current year. ($25,000 - $25,000 = $0).