Use the Following Information for Questions

question 16

Multiple Choice

Use the following information for questions
On February 1, 2007, Norton Company factored receivables with a carrying amount of $300,000 to Koch Company.Koch Company assesses a finance charge of 3% of the receivables and retains 5% of the receivables.Relative to this transaction, you are to determine the amount of loss on sale to be reported in the income statement of Norton Company for February.
-Assume that Norton factors the receivables on a without recourse basis.The loss to be reported is

• A)$0.
• B)$9,000.
• C)$15,000.
• D)$24,000.

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Definitions:

Relevant Costs

Costs that will be affected by a decision and are future-oriented.

Predetermined Overhead Rate

A rate used to charge manufacturing overhead cost to jobs that is established in advance for each period. It is computed by dividing the estimated total manufacturing overhead cost for the period by the estimated total amount of the allocation base for the period.

Special Order

A one-time order or contract that is outside of a company’s normal production or service offerings, often requiring special terms.

Variable Cost

Costs that vary directly with the level of production or volume of output.