Thunder Company factored P5,000,000 of accounts receivable. Control was surrendered by Thunder. The transaction met the criteria to be accounted for as sale but subject to recourse for nonpayment. The fair value of the recourse obligation is P250,000. The finance company assessed a fee of 6% and retained a holdback equal to 10% of the accounts receivable. In addition, the finance company charged 12% interest computed on a weighted average time to maturity of the accounts receivable for 30 days. What amount should be reported as loss on factoring assuming the accounts are fully collected by the factor?

Thunder Company factored P5,000,000 of accounts receivable. Control was surrendered by Thunder. The transaction met the criteria to be accounted for as sale but subject to recourse for nonpayment. The fair value of the recourse obligation is P250,000. The finance company assessed a fee of 6% and retained a holdback equal to 10% of the accounts receivable. In addition, the finance company charged 12% interest computed on a weighted average time to maturity of the accounts receivable for 30 days. What amount should be reported as loss on factoring assuming the accounts are fully collected by the factor?

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter6: Cash And Receivables

Section: Chapter Questions

Problem 14RE: On June 1, Phillips Corporation sold, with recourse, a note receivable from a customer to a bank....

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