Sun Inc. records a loss of $2,070,000 on the transfer of receivables.
Calculate the face value of the receivables.
The face value of the receivables is the total amount of money that Sun Inc. is owed by its customers. In this case, the face value of the receivables is $3,000,000.
The present value of the loan is calculated using the following formula:
present_value = loan_amount * (1 - interest_rate)
Where:
`present_value` is the present value of the loan
`loan_amount` is the amount of the loan
interest_rate` is the annual interest rate
In this case, the loan amount is $1,000,000 and the interest rate is 8%. Therefore, the present value of the loan is:
present_value = 1000000 * (1 - 0.08) = 920000
The total proceeds from the transaction is calculated using the following formula:
total_proceeds = present_value + finance_fee
In this case, the present value of the loan is $920,000 and the finance fee is $10,000. Therefore, the total proceeds from the transaction is:
total_proceeds = 920000 + 10000 = 930000
The gain (loss) on the transfer of receivables is calculated using the following formula:
gain_loss = face_value_receivables - total_proceeds
In this case, the face value of the receivables is $3,000,000 and the total proceeds from the transaction is $930,000. Therefore, the gain (loss) on the transfer of receivables is:
gain_loss = 3000000 - 930000 = 2070000
Therefore, Sun Inc. will record a loss of $2,070,000 on the transfer of receivables.