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12 November, 06:26

At the end of June, the Marquess Company factored $200,000 in accounts receivable with Homemark Finance. The transfer is made without recourse. Homemark charges a fee of 3% of receivables factored. During July, $150,000 of the factored receivables are collected. What amount of loss on sale of receivables would Marquess record in June?

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  1. 12 November, 09:04
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    The loss recorded on the factoring arrangement is $6,000

    Explanation:

    The loss recorded by Marquess Company on the sale of receivables of $200,000 is the fee of 3% paid since the factor company does not have any recourse to Marquess Company.

    A case of recourse who have meant that the factor company can transfer any debt uncollected thereafter to Marquess Company, which does not arise in this case.

    Loss on receivables=Amount factored*factoring fee of 3%

    =$200,000*3%=$6,000
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