Question

on february 1, 2023, wildhorse corp. factored recievables with a carrying amount of $305000 to blossom inc. blossom assessed a finance charge of 4% of the recievables and retained 5% of the recievables. assume that wildhorse factors the recievables on a with recourse basis. the recourse obligation has a fair value of $1220. what is the value of the holdback that would be due from factor?

Answer 1

To calculate the value of the holdback, subtract the finance charge and recourse obligation from the carrying amount of the receivables. The value of the holdback would be $291,580.

Step-by-step explanation:

To calculate the value of the holdback that would be due from the factor, we need to determine the total finance charge and the total recourse obligation. The finance charge is 4% of the receivables, so it would be $305,000 x 4% = $12,200. The recourse obligation has a fair value of $1,220. To find the value of the holdback, we subtract the finance charge and the recourse obligation from the carrying amount of the receivables:

Value of holdback = Carrying amount of receivables - Finance charge - Recourse obligation = $305,000 - $12,200 - $1,220 = $291,580.