Reference no: EM132913117
Question - The Nagaraya Company is in dire need of money to pay its maturing obligations and decided to use its accounts receivable to augment its cash requirements:
On January 1, Nagaraya Company assigned P100,000 of accounts receivable to the FM Finance. Nagaraya Company received an advance from FM Finance of 70% of the assigned accounts receivable. The factor charge Nagaraya Company 2% as a service fee.
As of December 31, Nagaraya Company collected P60,000 on the assigned accounts receivable. Nagaraya Company remitted the amount collected plus P5,000 interest.
June 30, Nagaraya sold outrightly P200,000 accounts receivable to a factor for P160,000. The said accounts receivable has a corresponding allowance for uncollectible accounts in Nagaraya Company's book.
September 30, Darwin receive the proceeds of a P150,000 principal amount of a loan from a financial institution by pledging P250,000 accounts receivables. The financial institution charges Darwin Company a 2% service fee, which is deducted from the principal amount of the loan.
Required -
1. How much is the total financing cost during the year?
2. How much is the loss from financing during the year?
3. How will the company present its accounts receivables in the financial statements at year-end?
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