A Firm Factors $40,000 of Accounts Receivable Without Recourse

question 21

Multiple Choice

A firm factors $40,000 of accounts receivable without recourse.The factor agrees to provide financing based on these receivables,but imposes a 10% fee.In addition,the transferor and transferee agree that $3,000 of sales returns and allowances can be expected from these accounts.What is the loss or expense to recorded by the transferor?

• A) $7,000
• B) $4,000
• C) $3,000
• D) $0

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Definitions:

Payroll Tax Expense

Represents the taxes that employers are required to pay based on the wages and salaries of their employees; this includes taxes like Social Security and Medicare in the US.

State Unemployment Taxes

Taxes paid by employers to fund the state's unemployment insurance program, providing financial assistance to workers who have lost their jobs.

Employee Payroll Deductions

Amounts withheld from an employee's salary for taxes, insurance, and other mandatory or voluntary contributions.

Federal Unemployment Taxes

Taxes paid by employers to the federal government to fund unemployment benefits and job service programs.