Calahan Corporation Regularly Factors Its Receivables When They Are Short

Calahan Corporation regularly factors its receivables when they are short of cash. This spring they not only factored $325,000 of receivables at 80 percent of their value but sold two company automobiles that they had purchased five months earlier for $45,000 for only $38,000. What are Calahan’s losses on these sales and how do they affect its income?

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