Question

Bramble Corp. factors $3250000 of its accounts receivables without recourse for a finance charge of 4%. The finance company retains an amount equal to 9% of the accounts receivable for possible adjustments. Bramble estimates the fair value of the recourse liability at $300000. What would be the debit to Cash in the journal entry to record this transaction

Answer 1

Answer: $3,672,500

Explanation:

Based on the information given in the question, the debit to cash in the journal entry to record this transaction will be:

= $3,250,000 - ($3,250,000 × 4%) + ($3,250,000 × 9%)

= $3,250,000 - $130,000 + $292,500

= $3,672,500

Therefore, the debit to cash will be $3,672,500.