Reference no: EM132864763

Carnival Company found itself in financial difficulties and decided to use its accounts receivable as a means of obtaining cash to continue operations. On July 1, 2020, Carnival factored of P750,000 of accounts receivable for cash proceeds of P695,000. No bad debt allowance was associated with these accounts.

• On December 17, 2020, Carnival assigned the reminder of its accounts receivable, P2,500,000 as of date, as collateral on a P1,250,000, 12% annual interest rate loan form Eastmont Company. Carnival received P1,250,000 less 2% finance charge.

Additional information is as follow:

1. Allowance for Bad Debts, 12/31/20 (before adjustment) - P32,000
2. Estimated Uncollectibles, 12/31/20- 3% of Accounts receivable
3. Accounts Receivable (not including factored and assigned accounts), December 31,2016 - P500,000
4. Of the assigned accounts, P300,000 had been collected by the end of the year.

Answer the following questions and kindly show your solution clearly:

Question 1: How much were the proceeds from factoring and general assignment of the accounts receivable?

Question 2: Using the same information, assuming these are the only transactions affecting receivables, how much is the bad debts expense for the year ended December 31, 2020?