Use the Following Information for Questions

question 2

Multiple Choice

Use the following information for questions
On February 1, 2010, Otto Company factored receivables with a carrying amount of $200,000 to Kassim Company.Kassim Company assesses a finance charge of three percent of the receivables and retains five percent 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 Otto Company for February.
-Assume that Otto factors the receivables on a recourse basis.The recourse obligation has a fair value of $1,000.The loss to be reported is

• A)$6,000.
• B)$7,000.
• C)$10,000.
• D)$17,000.

---

Definitions:

Agent's Act

Refers to actions taken by an agent on behalf of a principal, where the agent has the authority to affect the principal's legal position.

Principal's Conduct

Actions or behaviors of a principal (party who has authorized an agent to act on their behalf) that can affect the principal's legal rights and liabilities.

Express Ratification

The explicit approval or confirmation of an act or contract by all parties involved, often necessary for the act's validity.

Manifests Assent

The demonstration of agreement to the terms of a contract, often through an overt action or explicit consent.