On its second year of operations, Victorias Co. thought of expanding its business. In order to generate additional cash necessary for this expansion, the company on September 1, 2009, factored P200,000 of accounts receivable to Escalante Finance Co. Factoring fee was 10% of the receivables purchased. The Finance Co. with-held 5% of the purchase price as protection against sales returns and allowances. On November 2, 2009, accounts receivable amounting to P500,000 was assigned to La Carlota Bank as collateral on P300,000, 20% annual interest rate loan. A 3% finance charge was deducted in advance. As of December 31, 2009, data relating to accounts receivable follows: Allowance for doubtful accounts – P6,700 (credit) Estimated uncollectibles – 2% of accounts receivable Accounts receivable excluding factored and assigned accounts – P95,000 Collections on assigned accounts – none The total cash generated from factoring and assigning the accounts receivable was A. P402,000 B. P456,000 C. P461,000 D. P466,000
On its second year of operations, Victorias Co. thought of expanding its business. In order to generate additional cash necessary for this expansion, the company on September 1, 2009, factored P200,000 of accounts receivable to Escalante Finance Co. Factoring fee was 10% of the receivables purchased. The Finance Co. with-held 5% of the purchase price as protection against sales returns and allowances. On November 2, 2009, accounts receivable amounting to P500,000 was assigned to La Carlota Bank as collateral on P300,000, 20% annual interest rate loan. A 3% finance charge was deducted in advance. As of December 31, 2009, data relating to accounts receivable follows: Allowance for doubtful accounts – P6,700 (credit) Estimated uncollectibles – 2% of accounts receivable Accounts receivable excluding factored and assigned accounts – P95,000 Collections on assigned accounts – none The total cash generated from factoring and assigning the accounts receivable was A. P402,000 B. P456,000 C. P461,000 D. P466,000
College Accounting, Chapters 1-27
23rd Edition
ISBN:9781337794756
Author:HEINTZ, James A.
Publisher:HEINTZ, James A.
Chapter16: Accounting For Accounts Receivable
Section: Chapter Questions
Problem 3CP: At the end of 20-3, Martel Co. had 410,000 in Accounts Receivable and a credit balance of 300 in...
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On its second year of operations, Victorias Co. thought of expanding its business. In order to generate additional cash necessary for this expansion, the company on September 1, 2009, factored P200,000 of
As of December 31, 2009, data relating to accounts receivable follows:
- Allowance for doubtful accounts – P6,700 (credit)
- Estimated uncollectibles – 2% of accounts receivable
- Accounts receivable excluding factored and assigned accounts – P95,000
- Collections on assigned accounts – none
The total cash generated from factoring and assigning the accounts receivable was
A. P402,000
B. P456,000
C. P461,000
D. P466,000
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