1. Assume Royal Palm Corp., an equipment distributor, sells a piece of machinery with a list price of $900,000 to Arch Inc. Arch Inc. will pay $975,000 in one year. Royal Palm Corp. normally sells this type of equipment for 90% of list price. How much should be recorded as revenue?
a. $900,000.
b. $975,000.
c. $877,500.
d. $810,000.
2. Sun Inc. factors $6,000,000 of its accounts receivables without recourse for a finance charge of 5%. The finance company retains an amount equal to 10% of the accounts receivable for possible adjustments. Sun estimates the fair value of the recourse liability at $230,000. What would be recorded as a gain (loss) on the transfer of receivables?
a. Loss of $230,000.
b. Loss of $1,130,000.
c. Gain of $530,000.
d. Loss of $300,000.