ABC Company decides to sell a part its portfolio of trade receivables to the factoring company. The following relates to the factored receivables: Carrying amount of receivables ₱4,000,000 Fair value of the receivables 4,040,000 Cash received from factoring 3,830,000 The related contract stipulates that: Payment for the receivables ₱3,800,000 Payment for the Guarantee 30,000 According to the guarantee, ABC Company agrees to refund the credit losses from the portfolio of receivables up to ₱450,000 to the factoring company. The necessary journal entry or entities if receivables to record the factoring would include a. Debit to Cash ₱3,800,000 b. Debit to Loss on sale of receivable, ₱200,000 c. Credit to Liability, ₱480,000 d. Debit to Receivable from Factor, ₱25,000
ABC Company decides to sell a part its portfolio of trade receivables to the factoring company. The following relates to the factored receivables: Carrying amount of receivables ₱4,000,000 Fair value of the receivables 4,040,000 Cash received from factoring 3,830,000 The related contract stipulates that: Payment for the receivables ₱3,800,000 Payment for the Guarantee 30,000 According to the guarantee, ABC Company agrees to refund the credit losses from the portfolio of receivables up to ₱450,000 to the factoring company. The necessary journal entry or entities if receivables to record the factoring would include a. Debit to Cash ₱3,800,000 b. Debit to Loss on sale of receivable, ₱200,000 c. Credit to Liability, ₱480,000 d. Debit to Receivable from Factor, ₱25,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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ABC Company decides to sell a part its portfolio of trade receivables to the factoring company. The following relates to the factored receivables:
Carrying amount of receivables ₱4,000,000
Fair value of the receivables 4,040,000
Cash received from factoring 3,830,000
The related contract stipulates that:
Payment for the receivables ₱3,800,000
Payment for the Guarantee 30,000
According to the guarantee, ABC Company agrees to refund the credit losses from the portfolio of receivables up to ₱450,000 to the factoring company.
The necessary journal entry or entities if receivables to record the factoring would include
a. Debit to Cash ₱3,800,000
b. Debit to Loss on sale of receivable, ₱200,000
c. Credit to Liability, ₱480,000
d. Debit to Receivable from Factor, ₱25,000
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