On January 31$t, 2021, X Co. transfers $400,000 in receivables to Cater Finance with recourse. Cater charges a fee of 4% of the Account Receivable. X estimates a $3,000 recourse liability. Cater will immediately remit 90% of the factored receivables to X, and retain 10%. When Cater collects the remaining receivables, it remits the amount, less the fee, to X. X estimates that the fair value of the final 10% of the receivables is $25,000. X will record a Loss on Sale of Receivables of 34,000 9,000 25,000 40,000
On January 31$t, 2021, X Co. transfers $400,000 in receivables to Cater Finance with recourse. Cater charges a fee of 4% of the Account Receivable. X estimates a $3,000 recourse liability. Cater will immediately remit 90% of the factored receivables to X, and retain 10%. When Cater collects the remaining receivables, it remits the amount, less the fee, to X. X estimates that the fair value of the final 10% of the receivables is $25,000. X will record a Loss on Sale of Receivables of 34,000 9,000 25,000 40,000
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter6: Cash And Receivables
Section: Chapter Questions
Problem 14RE: On June 1, Phillips Corporation sold, with recourse, a note receivable from a customer to a bank....
Related questions
Question
Transcribed Image Text:On January 31st, 2021, X Co. transfers $400,000 in
receivables to Cater Finance with recourse. Cater charges a
fee of 4% of the Account Receivable. X estimates a $3,000
recourse liability. Cater will immediately remit 90% of the
factored receivables to X, and retain 10%. When Cater
collects the remaining receivables, it remits the amount, less
the fee, to X. X estimates that the fair value of the final 10%
of the receivables is $25,000. X will record a Loss on Sale of
Receivables of
34,000
9,000
25,000
40,000
Expert Solution
Step 1
Amount Retained by Cater Finance:
| Factored Receivables | $ 400,000 |
| 10% of Factored Receivables Retained | $ 40,000 |
| Fair Value of Amount Retained | $ 25,000 |
| Loss on Amount Retained | $ 15,000 |
Step by step
Solved in 3 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:
9781337788281
Author:
James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:
Cengage Learning
Principles of Accounting Volume 1
Accounting
ISBN:
9781947172685
Author:
OpenStax
Publisher:
OpenStax College
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:
9781337788281
Author:
James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:
Cengage Learning
Principles of Accounting Volume 1
Accounting
ISBN:
9781947172685
Author:
OpenStax
Publisher:
OpenStax College
Individual Income Taxes
Accounting
ISBN:
9780357109731
Author:
Hoffman
Publisher:
CENGAGE LEARNING - CONSIGNMENT
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:
9781337514835
Author:
MOYER
Publisher:
CENGAGE LEARNING - CONSIGNMENT