ABE Company factored P100,000 of its accounts receivable to Cee Company for P85,000. An allowance for bad debts equal to P3,000 was previously established for the account factored. Cee Company withheld 5% of the purchase price as protection against sales returns and allowance. Determine the following assuming sale of receivable is with recourse. 1. Cash receivedAnswer 2. Cost of factoring
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.
ABE Company factored P100,000 of its
Determine the following assuming sale of receivable is with recourse.
1. Cash receivedAnswer
2. Cost of factoring
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