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Question # 6 Honest Corp. transfers all of its receivables (with a face value of $300,000) to ZZZ Factors on August 13. ZZZ Factors generally

Question # 6

Honest Corp. transfers all of its receivables (with a face value of $300,000) to ZZZ Factors on August 13. ZZZ Factors generally assesses a finance charge of 2% of the face value of the receivables and withholds an amount equal to 4% to cover any possible returns and allowances. The fair value of any recourse liability is $2,000.

Record this transfer assuming that conditions are met to allow it to be recorded as a

  1. transfer without recourse
  2. transfer with recourse
  3. sale
  4. collateralized borrowing
  5. transfer without recourse but Honest Corp. has an allowance for bad debts account of $9,000.

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