Question
On April 1, Morocco Ltd. factored $500,000 of accounts receivable with Kenya Finance Corp. on a without recourse basis. Under the arrangement, Morocco was to
On April 1, Morocco Ltd. factored $500,000 of accounts receivable with Kenya Finance Corp. on a without recourse basis. Under the arrangement, Morocco was to handle disputes concerning service, and Kenya Finance was to make the collections, handle the sales discounts, and absorb the credit losses. Kenya Finance assessed a finance charge of 5% of the total accounts receivable factored and retained an amount equal to 2% of the total receivables to cover sales discounts.
What is the total cost that Morocco Ltd. will incur in the scenario of pledging these accounts receivable as a security for a loan?
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