Mazda Company sold P5,800,000 in accounts receivable for cash of P5,000,000. The factor withheld 10% of the cash proceeds to allow for possible customer returns and other adjustments. An allowance for bad debts of P600,000 had previously been established by Mazda in relation to these accounts. What was the loss on factoring recognized by Mazda Company?
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.
Mazda Company sold P5,800,000 in
What was the loss on factoring recognized by Mazda Company?
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
