Reference no: EM132778449
Katy Inc. has been in financial trouble the past few months of 2020. The firm has just saved itself from near bankruptcy by relaxing its credit policy to boost up sales. As a result, collection period of accounts receivable has been prolonged. The company is running out of cash. Overdue accounts payable and other currently maturing obligations have to be paid if the company wants to maintain its credit standing, good relationship with creditors and continue smooth flow of operations.
To solve the problem, the company has the following options to be done on July 1, 2020:
A. Obtain P1,500,000 loans from a bank by pledging P3,000,000 A/R and issuing a 1 year 10% promissory note. Accordingly, the bank will discount the note.
B. Assign P2,000,000 of its A/R to obtain a loan from Taylor Financing which guaranteed Katy Inc. to receive a loan equal to 75% of accounts assigned less service charge equal to 3% of accounts assigned, after it issue a promissory note carrying 3% per month to the said financing institution. Taylor Financing shall be the one to collect the A/R assigned.
C. Sell P2,000,000 of its A/R to Ariana Financing in a notification, without recourse basis. The estimated selling price shall be P1,600,000 after estimating that P200,000 of the accounts might prove to be uncollectible.
D. Factor P2,000,000 of its accounts receivable to Ariana Financing which guaranteed to release 75% of the receivables factored, net of P50,000 service charges.
REQUIRED:
Problem 1. If Katy Inc. resorted to pledging of A/R, what is the value of notes payable to appear on the balance sheet as of December 31, 2020?
|
What type of organizational culture is most ideal for you
: The major from Brazil introduced a very young accountant as the lead coordinator of the US $ 20 million joint venture. The Dutch delegation was confused.
|
|
What are the related journal entries to be made for katy inc
: What are the related journal entries to be made in 2020? Received notice from Ariana Financing that customers were granted returns of P40,000
|
|
What are the related journal entries to be made in katy inc
: What are the related journal entries to be made in 2020? Received notice from Taylor Financing that customers were granted returns amounting to P40, 000.
|
|
How you would go about getting the organisation to change
: Explain how you would go about getting the organisation to change to compensation system you are recommending. Explain how job analysis and performance.
|
|
What is the value of notes payable to appear
: If Katy Inc. resorted to pledging of A/R, what is the value of notes payable to appear on the balance sheet as of December 31, 2020?
|
|
How do prepare the journal entry to record accrued interest
: How do Prepare the journal entry to record accrued interest at December 31, assuming adjusting entries are made only at the end of the year.
|
|
Assess the extent to which curtin corporate governance
: Assess the extent to which Curtin's corporate governance arrangements and situation fail to constitute governance best practice.
|
|
What is taking off uncomfortable shoes
: On your way home after the job interview you are so happy to take off the uncomfortable shoes. What is taking off your uncomfortable shoes?
|
|
Show the statement of financial position presentation on dec
: Show statement of financial position presentation on December 31, 2017. On May 1, 2017, Pearl Industries AG issued CHF173,100, 12%, 5-year bonds at face value
|