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What is the loss on factoring to be recognized by soriano

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Reference no: EM132966006

Jay Company provides financing to other companies by purchasing their accounts receivable on a nonrecourse basis. Jay charges its clients a commission of 15% on all receivable factored. In addition, Jay withholds 10% of receivables factored as protection against sales returns or other adjustments. Experience has led Jay to establish an allowance for bad debts of 6% of all receivables purchased.

Problem 1: On January 15, Jay purchased receivables from Soriano Company totaling P2,500,000. Soriano had previously an allowance for bad debts for these receivables at P35,000. By January 31, Jay had collected P2,200,000 on these receivables. What is the loss on factoring to be recognized by Soriano Company?

a. P340,000

b. P375,000

c. P625,000

d. P 0

Reference no: EM132966006

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