ABC factored P60,000 accounts receivable to XYZ Financing on a without recourse basis on January 1, 20x1. XYZ charged a 4% service fee and retained a 10% holdback to cover expected sales returns. In addition, XYZ charged a 12% interest computed on a weighted average time to maturity of the receivables of 73 days based on 365 days. ABC factored the receivables on a with recourse basis and determines that the recourse obligation has a fair value of P3,000. Under factoring as a regular means of financing, the total cost of factoring if the debtor defaults would be
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.
17. ABC factored P60,000
The correct answer is: 6,840
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