During the second year of operations, Rabbit Company found itself in financial difficulties. The entity decided to use the accounts receivable as a means of obtaining cash to continue operation. On July 1, 2022, the entity sold P1,500,000 of accounts receivable for cash proceeds of P1,400,000. No allowance for doubtful accounts was associated with these accounts. On December 15, 2022, the entity assigned the remainder of its accounts receivable, P5,000,000 as of that date, as collateral on a P2,500,000, 12% annual interest rate loan from Finance Company. The entity received P2,500,000 less a 2% finance charge. None of the assigned accounts have been collected by the end of the year. It is estimated that 10% of accounts receivable would be uncollectible. The entity revealed the following data on December 31, 2022. Accounts Receivable, excluding factored and assigned ACCOUNTS 1,000,000 Accounts receivable -assigned 5,000,000 Accounts receivable – factored 1,500,000 Allowance for doubtful accounts before adjustment 100,000 1. What total amount was received from the financing of accounts receivable? A. 3,900,000 B. 3,850,000 C. 3,950,000 D. 4,000,000 2. What amount should be reported as net realizable value of accounts receivable on December 31, 2022? A. 4,500,000 B. 5,400,000 C. 6,000,000 D. 5,000,000 3. What amount should be recognized as doubtful accounts expense for 2022? A. 600,000 B. 500,000 C. 650,000 D. 0

FINANCIAL ACCOUNTING
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ISBN:9781259964947
Author:Libby
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Chapter1: Financial Statements And Business Decisions
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During the second year of operations, Rabbit Company found itself in financial difficulties. The entity
decided to use the accounts receivable as a means of obtaining cash to continue operation.
On July 1, 2022, the entity sold P1,500,000 of accounts receivable for cash proceeds of P1,400,000. No
allowance for doubtful accounts was associated with these accounts.
On December 15, 2022, the entity assigned the remainder of its accounts receivable, P5,000,000 as of
that date, as collateral on a P2,500,000, 12% annual interest rate loan from Finance Company. The entity
received P2,500,000 less a 2% finance charge.
None of the assigned accounts have been collected by the end of the year. It is estimated that 10% of
accounts receivable would be uncollectible.
The entity revealed the following data on December 31, 2022.

Accounts Receivable, excluding factored and assigned ACCOUNTS 1,000,000
Accounts receivable -assigned 5,000,000
Accounts receivable – factored 1,500,000
Allowance for doubtful accounts before adjustment 100,000

1. What total amount was received from the financing of accounts receivable?
A. 3,900,000 B. 3,850,000 C. 3,950,000 D. 4,000,000
2. What amount should be reported as net realizable value of accounts receivable on December
31, 2022?
A. 4,500,000 B. 5,400,000 C. 6,000,000 D. 5,000,000
3. What amount should be recognized as doubtful accounts expense for 2022?
A. 600,000 B. 500,000 C. 650,000 D. 0

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