On November 1, ABC factors $300,000 of accounts receivable with D Corporation without recourse. D will collect the receivables on a notification basis. D advances 90% of the Accounts factored to ABC initially, and assesses a finance charge of 4% of the accounts factored which will be remitted at the end of the agreement. D reserves the balance of accounts receivables factored to cover probable adjustments for sales returns and allowances. ABC does not offer any sales discounts. On November 1, after the factoring transaction has been recorded, determine the effect on ABC’s assets: Assets increased by $270,000 Assets decreased by $12,000 Assets decreased by $30,000 Assets decreased by $300,000
On November 1, ABC factors $300,000 of accounts receivable with D Corporation without recourse. D will collect
the receivables on a notification basis. D advances 90% of the Accounts factored to ABC initially, and assesses a finance charge of 4% of the accounts factored which will be remitted at the end of the agreement. D reserves the balance of accounts receivables factored to cover probable adjustments for sales returns and allowances. ABC does not offer any sales discounts. On November 1, after the factoring transaction has been recorded, determine the effect on ABC’s assets:
Assets increased by $270,000
Assets decreased by $12,000
Assets decreased by $30,000
Assets decreased by $300,000
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