Answer:
a. Following conditions should be met:
1. The transferred asset has been isolated from the transferrer.
2. The transferees have obtained the right to pledge or to exchange the transferred asset.
3. The transferrer does not maintain any kind of control over transferred asset .
Explanation:
a. Following conditions should be met:
1. The transferred asset has been isolated from the transferrer.
2. The transferees have obtained the right to pledge or to exchange the transferred asset.
3. The transferrer does not maintain any kind of control over transferred asset
b) Computation of net proceeds:
Cash received(175,000×94%)=$164,500
Add Due from factor(175000×4%)=$7,000
Less recourse obligation=$2,000
Net proceeds=$169,500
Computation of gain or loss:
Carrying value=$175,000
Less net proceeds=$169,500
Loss=$5,500
