Question

Trell Corporation transferred $50,000 of accounts receivable to a local bank. The transfer was made

      without recourse. The local bank remits 80% of the factored amount to Trell and retains the remaining

      20%. When the bank collects the receivables, it will remit to Trell the retained amount less a fee equal

      to 3% of the total amount factored. Trell estimates a fair value of its 20% interest in the receivables of

      $8,000 (not including the 3% fee). Trell will show an amount receivable from factor of:

      a. $10,000.

      b. $8,500.

      c. $8,000.

      d. $6,500.

Answer 1

Fair value of its 20% interest in the receivables	8000
Less: Factoring fee	1500	=50000*3%
Amount receivable from factor	6500
Option D $6,500 is correct