NEAR Company factored P 885,000 of accounts receivable at year-end. Control was surrendered. The factor accepted the accounts receivable subjected to recourse for non-payment. The factor assessed a fee of 2% and retained a hold back equal to 4% of the accounts receivable. In addition, the factor charged 12% interest computed on a weighted average tome to maturity of fifty-one days. What is the amount of cash initially received from the factoring? What is the cost of factoring 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.
NEAR Company factored P 885,000 of
The factor assessed a fee of 2% and retained a hold back equal to 4% of the accounts receivable.
In addition, the factor charged 12% interest computed on a weighted average tome to maturity of fifty-one days.
- What is the amount of cash initially received from the factoring?
- What is the cost of factoring the accounts receivable?
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