On February 1, 2021, JANE Company factored receivables with a carrying amount of ₱300,000 to JACK Company. JACK Company assesses a finance charge of 3% of the receivables and retains 5% of the receivable for possible sales returns. Relative to this transaction, you are to determine the amount of loss on sale or factoring to be reported in the income statement of JANE Company for February. Assume that JANE factors the receivables on a without recourse basis. 1.) The loss to be reported is? * a. 24,000 b. 0 c. 15,000 d. 9,000 2.) The amount of cash initially to be received is? a. 276,000 b. 300,000 c. 285,000 d. 291,000
Bad Debts
At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
On February 1, 2021, JANE Company factored receivables with a carrying amount of ₱300,000 to JACK Company. JACK Company assesses a finance charge of 3% of the receivables and retains 5% of the receivable for possible sales returns. Relative to this transaction, you are to determine the amount of loss on sale or factoring to be reported in the income statement of JANE Company for February. Assume that JANE factors the receivables on a without recourse basis.
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