Determine the amount of loss on sale to be reported

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Question - Use the following information for 14-16. On February 1, 2021, Blue Hour Company factored receivables with a a carrying amount of Php2,000,000 to Sweet Night Corporation. Blue Hour assess a finance charge of 3% of the receivables and retains 5% of the receivables.

1. Determine the amount of loss on sale to be reported in the income statement of Blue Hour relative to this transaction for February.

a. None

b. Php60,000

c. Php100,000

d. Php160,000

2. Assume that Blue Hour factors the receivables on a recourse basis. The recourse obligation has a fair value of Php30,000. The loss to be reported should be

a. Php60,000

b. Php90,000

c. Php120,000

d. Php150,000

3. Assume that Blue Hour Company retained significant amount of risks and rewards of ownership on the factored financial asset, what amount of loss from factoring should the company recognize?

a. None

b. Php60,000

c. Php100,000

d. Php160,000

Reference no: EM133078626

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