Peggy Is in the Business of Factoring Accounts Receivable

question 82

Multiple Choice

Peggy is in the business of factoring accounts receivable. Last year, she purchased a $30,000 account receivable for $25,000. This year, the account was settled for $25,000. How much loss can Peggy deduct and in which year?

• A) $5,000 for the current year.
• B) $5,000 for the prior year and $5,000 for the current year.
• C) $5,000 for the prior year.
• D) $10,000 for the current year.
• E) None of the above.

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Definitions:

Sales Tax

A government-imposed tax on the sale of goods and services, collected by retailers at the point of sale.

Tax Rate

The percentage at which an individual or corporation is taxed by the government on income or property.

Sales Tax

A tax imposed by governments on the sale of goods and services.

Sales Tax Rate

The percentage of sales price that is added to the sales price of goods and services, collected by sellers.