To improve the companys cash flow, Brick Inc sold all its trade accounts receivables to a factoring company for a cash price of $430,000 At the time, the face value of the receivables was $500,000 The selling price of $430,000 was determined as follows Face value $500,000 Deduct Estimated uncollect...

Brick Inc Since Brick Inc has sold its accounts receivable to a factoring company in the ordinary co ...

To improve the companys cash flow, Brick Inc. sold all its trade accounts receivables to a factoring

Question:

To improve the company’s cash flow, Brick Inc. sold all its trade accounts receivables to a factoring company for a cash price of $430,000. At the time, the of the receivables was $500,000. The selling price of $430,000 was determined as follows:
Face value……………. $500,000
Deduct:…………………..
Estimated uncollectible……. 40,000
Fee to factor company……. 30,000
Net cash price received…………… $430,000
Stone Inc. closed its business and sold all of its assets to a purchaser who continued to operate the business. The selling price allocated to the was $460,000 determined as follows:
Face value…………… $500,000
Less estimated uncollectible …… 40,000
Net cash price received…………… $460,000
Describe the tax treatment to Brick and Stone of the sale of the Income tax reference: ITA 22, 20(1)(l), (p)].
Accounts Receivable
Accounts receivables are debts owed to your company, usually from sales on credit. Accounts receivable is business asset, the sum of the money owed to you by customers who haven’t paid.The standard procedure in business-to-business sales is that... Face Value
Face value is a financial term used to describe the nominal or dollar value of a security, as stated by its issuer. For stocks, the face value is the original cost of the stock, as listed on the certificate. For bonds, it is the amount paid to the...