Carnival Co found itself in financial difficulties and decided to use its accounts receivable as a means of obtaining cash to continue operations. On July 1, 2020, Carnival factored P750,000of accounts receivable for cash proceeds of P695,000. No bad debts allowance was associated with these accounts. On Dec 17 2020, Carnival assigned the remainder of its receivable , P2,500,000 at 12 pct interest rate loan from Westnut Co. Carnival received P1,250,000 less2 pct finance chare. All for bad debts 12/31/19 was P32,000.Estimated uncollectibles 12/31/20 is 3 pct of accounts receivable not including factored and assigned accounts is P500,000. On the assigned accounts, P300,000 has been collected by the end of the year. How much were the proceeds from factoring and general assignment of the accounts receivable?
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.
Carnival Co found itself in financial difficulties and decided to use its
On the assigned accounts, P300,000 has been collected by the end of the year. How much were the proceeds from factoring and general assignment of the accounts receivable?
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