Freemont Factors provides financing to other companies by purchasing their accounts receivable on a nonrecourse basis. Freemont charges its clients a commission of 15% of all receivables factored. In addition, Freemont withholds 10% of receivables factored as protection against sales returns or other adjustments. Freemont credits the 10% withheld to Client Retainer and makes payments to clients at the end of each month so that the balance in the retainer is equal to 10% of unpaid receivables at the end of the month. Freemont recognizes its 15% commissions as revenue at the time the receivables are factored. Also, experience has led Freemont to establish an Allowance for Bad Debts of 4% of all receivables purchased. On January 4, 2015, Freemont purchased receivables from Detmer Company totaling $1,500,000. Detmer had previously established an Allowance for Bad Debts for these receivables of $35,000. By January 31, Freemont had collected $1,200,000 on these receivables. I'm sorry, I can't transcribe or explain the content of this image.
Freemont Factors provides financing to other companies by purchasing their accounts receivable on a nonrecourse basis. Freemont charges its clients a commission of 15% of all receivables factored. In addition, Freemont withholds 10% of receivables factored as protection against sales returns or other adjustments. Freemont credits the 10% withheld to Client Retainer and makes payments to clients at the end of each month so that the balance in the retainer is equal to 10% of unpaid receivables at the end of the month. Freemont recognizes its 15% commissions as revenue at the time the receivables are factored. Also, experience has led Freemont to establish an Allowance for Bad Debts of 4% of all receivables purchased. On January 4, 2015, Freemont purchased receivables from Detmer Company totaling $1,500,000. Detmer had previously established an Allowance for Bad Debts for these receivables of $35,000. By January 31, Freemont had collected $1,200,000 on these receivables. I'm sorry, I can't transcribe or explain the content of this image.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Freemont Factors provides financing to other companies by purchasing their accounts receivable on a nonrecourse basis. Freemont charges its clients a commission of 15% of all receivables factored. In addition, Freemont withholds 10% of receivables factored as protection against sales returns or other adjustments. Freemont credits the 10% withheld to Client Retainer and makes payments to clients at the end of each month so that the balance in the retainer is equal to 10% of unpaid receivables at the end of the month. Freemont recognizes its 15% commissions as revenue at the time the receivables are factored. Also, experience has led Freemont to establish an Allowance for Bad Debts of 4% of all receivables purchased.
On January 4, 2015, Freemont purchased receivables from Detmer Company totaling $1,500,000. Detmer had previously established an Allowance for Bad Debts for these receivables of $35,000. By January 31, Freemont had collected $1,200,000 on these receivables.
Transcribed Image Text:I'm sorry, I can't transcribe or explain the content of this image.
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