Use the following information for A-C On February 1, 2021, Blue Hour Company factored receivables with a a carrying amount of Php2,000,000 to Sweet Night Corporation. Blue Hour assess a finance charge of 3% of the receivables and retains 5% of the receivables.
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.
Use the following information for A-C
On February 1, 2021, Blue Hour Company factored receivables with a a carrying amount of Php2,000,000 to Sweet Night Corporation. Blue Hour assess a finance charge of 3% of the receivables and retains 5% of the receivables.
A. Determine the amount of loss on sale to be reported in the income statement of Blue Hour relative to this transaction for February.
a. None
b. Php60,000
c. Php100,000
d. Php160,000
B. Assume that Blue Hour factors the receivables on a recourse basis,. The recourse obligation has a fair value of Php30,000. The loss to be reported should be
a. Php60,000
b. Php90,000
c. Php120,000
d. Php150,000
C. Assume that Blue Hour Company retained significant amount of risks and rewards of ownership on the factored financial asset, what amount of loss from factoring should the company recognize?
a. None
b. Php60,000
c. Php100,000
d. Php160,000
Step by step
Solved in 4 steps
