thomas assessed a fee of 2 and retains a holdback equal to 4 of the accounts receiva 604404
Synthia Corp. factored $750,000 of accounts receivable to Thomas Company on December 3, 2006. Control was surrendered by Synthia. Thomas accepted the receivables subject to recourse for nonpayment. Thomas assessed a fee of 2% and retains a holdback equal to 4% of the accounts receivable. In addition, Thomas charged 12% interest computed on a weighted-average time to maturity of the receivables of fifty-one days. The fair value of the recourse obligation is $15,000. Assuming all receivables are collected, Synthia’s cost of factoring the receivables would be
- $12,575
- $15,000
- $27,575
- $42,575