Question

$220K of receivables are sold without recourse. Fee is $3%. Retained portion is 8% with an estimated fair value of $15K. Loss to be recognized is:

Answer 1

The loss to be recognized can be calculated as follows:

1. Calculate the total fee for selling the receivables: $220,000 * 3% = $6,600.

2. Determine the retained portion: $220,000 * 8% = $17,600.

3. The estimated fair value of the retained portion is given as $15,000.

4. Calculate the loss: $17,600 - $15,000 = $2,600.

Therefore, the loss to be recognized is $2,600.