Ming Company Factors Without Recourse $6,000,000 of Its Accounts Receivable

question 117

Multiple Choice

Ming Company factors without recourse $6,000,000 of its accounts receivable for a finance charge of 6%. The finance company retains an amount equal to 8% of the accounts receivable for possible adjustments. What amount of cash would Ming receive as a result of this initial transaction?

• A) $5,640,000
• B) $5,520,000
• C) $5,160,000
• D) $6,000,000

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Definitions:

Coupon Bond

A type of bond that pays the holder a fixed interest payment (coupon) at regular intervals until maturity.

Interest Basis

A method used to calculate interest payments, based on how the interest accrues over time.

Par Value

The face value of a bond or stock, representing the amount returned to the holder at maturity.

Common Stock

Equity ownership in a corporation, granting voting rights and a share in profits through dividends.