Reference no: EM132792983

Questions -

Q1. On December 1, 2020, ABC Company assigned specific accounts receivable totaling P5,000,000 as collateral on a P4,000,000, 12% note from certain bank. The entity will continue to collect the assigned accounts receivable. In addition to the interest on the note, the bank also charged a 5% finance fee deducted in advance on the assigned accounts. The December collections of assigned accounts receivable amounted to P2,000,000 less cash discount of P200,000. On December 31, 2020, the entity remitted the collections to the bank in payment for the interest accrued on December 31, 2020 and the note payable. The entity accepted sales returns of P100,000 on the assigned accounts and wrote off assigned accounts of P300,000. Compute for the amount of cash received from the assignment of accounts receivable on December 1, 2020.

Q2. On December 1, 2020, ABC Company assigned specific accounts receivable totaling P5,000,000 as collateral on a P4,000,000, 12% note from certain bank. The entity will continue to collect the assigned accounts receivable. In addition to the interest on the note, the bank also charged a 5% finance fee deducted in advance on the assigned accounts. The December collections of assigned accounts receivable amounted to P2,000,000 less cash discount of P200,000. On December 31, 2020, the entity remitted the collections to the bank in payment for the interest accrued on December 31, 2020 and the note payable. The entity accepted sales returns of P100,000 on the assigned accounts and wrote off assigned accounts of P300,000. Compute the carrying amount of the note payable on December 31, 2020.

Q3. DEF Company factored P6,000,000 of accounts receivable to a finance entity at the beginning of current year. Control was surrendered by DEF Company. The factor accepted the accounts receivable subject to recourse for nonpayment. The fair value of the recourse obligation is P100,000. The factor assessed a fee of 3% and retained a holdback equal to 5% of the accounts receivable. In addition, the factor charged 15% interest computed on a weighted average time to maturity of the accounts receivable of 54 days. Compute the amount of cash initially received from the factoring.

Q4. DEF Company factored P6,000,000 of accounts receivable to a finance entity at the beginning of current year. Control was surrendered by DEF Company. The factor accepted the accounts receivable subject to recourse for nonpayment. The fair value of the recourse obligation is P100,000. The factor assessed a fee of 3% and retained a holdback equal to 5% of the accounts receivable. In addition, the factor charged 15% interest computed on a weighted average time to maturity of the accounts receivable of 54 days. Assuming that all accounts are collected, what is the gain or (loss) on factoring the accounts receivable?

Q5. DEF Company factored P6,000,000 of accounts receivable to a finance entity at the beginning of current year. Control was surrendered by DEF Company. The factor accepted the accounts receivable subject to recourse for nonpayment. The fair value of the recourse obligation is P100,000. The factor assessed a fee of 3% and retained a holdback equal to 5%.