Joe Novak Corporation Factored, with Recourse, $100,000 of Accounts Receivable

question 8

Multiple Choice

Joe Novak Corporation factored, with recourse, $100,000 of accounts receivable with Huskie Financing.The finance charge is 3%, and 5% was retained to cover sales discounts, sales returns, and sales allowances.Joe Novak estimates the recourse obligation at $2,400.What amount should Joe Novak report as a loss on sale of receivables?

• A)$ -0-.
• B)$3,000.
• C)$5,400.
• D)$10,400.

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Definitions:

Utilization

Refers to the extent to which a system, resource, or workforce is used to achieve its maximum potential output or capacity.

Break-Even Point

The point at which total costs and total revenue are equal, meaning no net loss or gain is incurred; a critical measure of financial viability for a product or business.

Variable Cost

Costs that change in proportion to the level of production or sales volume, such as raw materials and direct labor.

Variable Cost

Costs that change in proportion to the level of activity or volume of production, such as materials and labor.