For the current period, ABC Co. had the following transactions with DEF Co.: Jul 01 Sales on account of P280,000, FOB shipping point, freight collect, P12,000. Jul 21 Partial collection of account, P80,000. Sep 01 Received a one-year, P220,000, noninterest bearing note for the unpaid balance. The prevailing rate for notes of this type is 10%. Dec 01 Discounted the note in a bank at 15% The company's policy for credit sales is a 2/10, 1/30, n/60 basis and normally grants the cash discount only upon full payment. Any applicable freight charge is allocated on a pro-rata basis. How much is the gain/(loss) on discounting?
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.
For the current period, ABC Co. had the following transactions with DEF Co.:
Jul 01 Sales on account of P280,000, FOB shipping point, freight collect, P12,000.
Jul 21 Partial collection of account, P80,000.
Sep 01 Received a one-year, P220,000, noninterest bearing note for the unpaid balance. The prevailing rate for notes of this type is 10%.
Dec 01 Discounted the note in a bank at 15%
The company's policy for credit sales is a 2/10, 1/30, n/60 basis and normally grants the cash
discount only upon full payment. Any applicable freight charge is allocated on a pro-rata basis.
How much is the gain/(loss) on discounting?
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