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Question 2 A company is considering factoring as a way of managing its trade receivables. It currently has a balance outstanding on trade receivables of R 2 500 000. It has annual sales revenue of R 15 000 000 which occurs evenly throughout the year. Trade receivable are expected to continue at the same level for the next year. The factor will advance 80% of the invoiced sales and will charge interest at a rate of 10% per annum. Required: The interest charge for the next year payable to the factor will be: A. R50 000 B. R200 000 C. R300 000 D. R1 200 000

Question 2 A company is considering factoring as a way of managing its trade receivables. It currently has a balance outstanding on trade receivables of R 2 500 000. It has annual sales revenue of R 15 000 000 which occurs evenly throughout the year. Trade receivable are expected to continue at the same level for the next year. The factor will advance 80% of the invoiced sales and will charge interest at a rate of 10% per annum. Required: The interest charge for the next year payable to the factor will be: A. R50 000 B. R200 000 C. R300 000 D. R1 200 000

Financial Accounting: The Impact on Decision Makers
Financial Accounting: The Impact on Decision Makers
10th Edition
ISBN:9781305654174
Author:Gary A. Porter, Curtis L. Norton
Publisher:Gary A. Porter, Curtis L. Norton
Chapter7: Receivables And Investments
Section: Chapter Questions
Problem 7.6E
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Question 2 A company is considering factoring as a way of managing its trade receivables. It currently has a balance outstanding on trade receivables of R 2 500 000. It has annual sales revenue of R 15 000 000 which occurs evenly throughout the year. Trade receivable are expected to continue at the same level for the next year. The factor will advance 80% of the invoiced sales and will charge interest at a rate of 10% per annum. Required: The interest charge for the next year payable to the factor will be: A. R50 000 B. R200 000 C. R300 000 D. R1 200 000
Transcribed Image Text:Question 2 A company is considering factoring as a way of managing its trade receivables. It currently has a balance outstanding on trade receivables of R 2 500 000. It has annual sales revenue of R 15 000 000 which occurs evenly throughout the year. Trade receivable are expected to continue at the same level for the next year. The factor will advance 80% of the invoiced sales and will charge interest at a rate of 10% per annum. Required: The interest charge for the next year payable to the factor will be: A. R50 000 B. R200 000 C. R300 000 D. R1 200 000
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