to improve the company s cash flow brick inc sold all its trade accounts receivables 4521461

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 face value 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 accounts receivable 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 accounts receivable. Income tax reference: ITA 22, 20(1)(l), (p)].

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