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?

Question

Valerie Knight

Business

20 March, 00:46

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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Answers (1)

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Ronnie Casey · Answer 1

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