Your company is in need of quick cash to afford a project

Reference no: EM13569466

(A) Your company is in need of quick cash to afford a project opportunity, so the firm decides to factor $100,000 of its receivables without recourse instead of waiting for collections. Identify the authoritative guidance that provides the criteria for classifying the transfer of financial assets as a sale.

(B) Assume that the transfer qualifies as a sale, and the institution purchasing the receivables pays $90,000. $3,000 of the amount kept is for a fee and the rest will be remitted after collections are made. $5,000 is the fair value of the amount to be remitted at a later date (receivable).

(1) Compute the gain or loss on the transfer of the receivables

(2) Cite the authoritative guidance that supports your answer to (1).

Reference no: EM13569466

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