Reference no: EM132709591

Questions -

Q1. ABC Co. factored 100,000 accounts receivable to XYZ Financing Corp. on a without recourse basis on January 1, 20x1. XYZ charged a 4% service fee and retained a 10% holdback to cover expected sales returns. In addition, XYZ charged a 12% interest computed on a weighted average time to maturity of the receivables of 73 days based on 365 days.

1. How much proceeds is received from the factoring on January 1, 20x1?

2. How much is the cost of factoring assuming all of the receivables have been collected?

Q2. On April 1, the AIM Inc. assigned 800,000 of accounts receivable to a bank under a nonnotifcation arrangement. The bank advances 80% less a service charge of 5,000. AIM Inc. signed a promissory note that provides for interest of 1% per month on the unpaid balance. On April 5, AIM Inc. issued a credit memo for sales return to a customer whose account was assigned for 50,000. On April 10, the company collected 300,000 of the assigned accounts less 2% discount. On April 30, AIM Inc. remitted the total collections to the bank plus interest for 1 month.

On May 7, 30,000 worth of assigned accounts proved to be worthless. On May 20, AIM Inc. collected 300,000 of the assigned accounts. On May 30, the company remitted the total amount due the bank to pay off the loan balance plus interest for one month. What is the remaining balance of assigned accounts receivable to be transferred back to unassigned accounts receivables?

Q2. BPI Inc. provides financing to other companies by purchasing their accounts receivable on a non-recourse basis. BPI Inc. charges its clients a commission of 15% on all receivables factored. In addition, BPI withholds 10% of receivables factored as protection against sales return and other adjustments. BPI Inc. credits the 10% withheld to Clients Retainer Account and makes payments to clients at the end of each month so that the balance in the retainer is equal to 10% of unpaid receivables at the end of the month. Experience has led BPI Inc. to establish an allowance for bad debts accounts of 4% of all unpaid receivables purchased. On December 31, 2014, BPI purchased receivables from DLSL Inc. totaling 5,000,000. DLSL Inc. had previously established an allowance for bad debts for these receivables at P200,000. By December 31, BPI Inc. had collected 4,000,000 on these receivables.

What is the amount of cash received by DLSL Inc. as a result of factoring?

Q3. What is the gain/(loss) on factoring to be recognized by DLSL Inc.?

Q4. On July 1, 2019, AWIT Inc. received a 180-day P1,000,000 note receivable from its customer with 10% interest. Due to financial difficulties, AWIT Inc. discounted the said notes receivable to RCBC Inc. on August 15, 2014 at a 15% discount rate. What is the net proceeds from the note discounting to be received by AWIT Inc.? (Assume 360-day)

Q5. What is the gain/(loss) on note receivable discounting to be recognized by AWIT Inc.?

Q6. On December 1, 2019, SAYAW Inc. received a 2-year, P2,000,000 non-interest bearing note from its customer. Due to financial difficulties, SAYAW Inc. discounted the said notes to UCPB Inc. on December 31, 2019 at a 10% discount rate. The applicable discount rate for the similar note is 12%. What is the net proceeds from the note discounting to be received by SAYAW Inc.?(Assume 360-day)

Q7. On July 1, AIG Inc. assigned P2,000,000 of accounts receivable to a bank under a notification arrangement. The bank loans 50% less 4% charge on the gross amount assigned. AIG Inc. signed a promissory note that provides 2% interest per month on the unpaid loan balance. On July 31, AIG Inc. received notice from the bank that P800,000 of the assigned accounts were collected less 5% discount. A check was sent to the bank for the interest. On August 31, AIG Inc. received notice from the bank that P500,000 of the assigned accounts were collected. Final settlement was made by the bank for the excess collections together with uncollected assigned accounts of P700,000. What is the amount of cash received from the bank in the final settlement?

Q9. On July 1, 20x1, ABC Co. discounted an 800,000, 90-day, 12% note, received from a customer on June 1, 20x1, with a bank at 16% on with recourse basis. The discounting is treated as conditional sale. The bank uses 365 days per year in computing for discounts. On August 30, 20x1 (maturity date), the maker of the note defaulted and the bank charged ABC Co. the maturity value of the note plus a 3,000 protest fee. How much is transferred to accounts receivable due to the dishonor and before impairment testing?

Q10. On July 1, 20x1, ABC Co. discounted its own note of 200,000 to a bank at 10% for one year. How much was the net proceeds received by ABC from the transaction?