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?

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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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.

  1. What is the amount of cash initially received from the factoring?
  2. What is the cost of factoring the accounts receivable?
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