Reference no: EM133000416
Question - On January 1, 2020, ABC Incorporated's statement of financial position showed a balance of 10 million of its accounts receivable. On this date, ABC assigned 4 million of its accounts receivable to XYZ Bank. As per agreement, ABC will continue to collect the assigned accounts receivable.
XYZ extended a six-month loan, bearing 12% interest, equivalent to 75% of the total assigned accounts. ABC received the loan proceeds net of 5% processing fee based on the total assigned accounts.
On January 20, 2020, a credit memo was issued by ABC for sales returns amounting to 150,000. These were part of the assigned accounts. On February 1, 2020 collections of the assigned accounts amounted to 1,000,000.
ABC remitted the collections the same date including the interest for one month. On April 30, 2020, 2,500,000 assigned accounts were collected. ABC made final settlement with the bank the same date by remitting the total amount due plus interest.
Required -
a. How much cash was received from the assignment of accounts receivable on January 1, 2020?
b. What would be the balance of its accounts receivable account on January 1, 2020 after assignment?
c. How much cash was remitted to XYZ Bank on April 30 in final settlement of the Loan?
d. If ABC's accounting period ends on February 28, how much equity on assigned accounts would be disclosed?
e. Give the entry to record transactions on February 1 and April 30?
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