Mortonson Corporation Factored, with Recourse, $300,000 of Accounts Receivable with Huskie

question 28

Multiple Choice

Mortonson Corporation factored, with recourse, $300,000 of accounts receivable with Huskie Financing.The finance charge is 3%, and 5% was retained to cover sales discounts, sales returns, and sales allowances.Mortonson estimates the recourse obligation at $7,200.What amount should Mortonson report as a loss on sale of receivables?

• A)$ -0-.
• B)$9,000.
• C)$16,200.
• D)$31,200.

---

Definitions:

Predetermined Overhead Rate

A calculated rate used to apply manufacturing overhead costs to products, based on estimated costs and activity levels before a period begins.

Predetermined Overhead Rate

A rate used to allocate manufacturing overhead to individual products or job orders, based on a set formula prior to the start of a period.

Manufacturing Overhead

Indirect costs related to the production process, such as equipment maintenance and factory rent.

Labor-Hours

A measure of the work effort in hours contributed by labor to produce a unit or complete a process.