AAA textiles limited factors 500,000 of A/R with BBB Factors Limited on a with recourse basis. The receivable records are transferred to BBB factors limited which will receive the collections. BBB factors limited assess a finance charge of 3% of the amount of A/R and retains an amount equal to 5% of the A/R. It is determined that the fair value of the recourse obligation is 6,000. Determine the amount that should be presented in the profit or loss by AAA as a result of the factoring transaction.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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AAA textiles limited factors 500,000 of A/R with BBB Factors Limited on a with recourse basis. The receivable records are transferred to BBB factors limited which will receive the collections. BBB factors limited assess a finance charge of 3% of the amount of A/R and retains an amount equal to 5% of the A/R. It is determined that the fair value of the recourse obligation is 6,000. Determine the amount that should be presented in the profit or loss by AAA as a result of the factoring transaction.

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