NNN Company factored P5,000,000 of accounts receivable to ABC Company on July 1, 2020. Control was surrendered by NNN. ABC assessed a fee of 5% and retains a holdback equal to 20% of the accounts receivable. In addition ABC charged 12% computed on a weighted average time to maturity of the receivables of 30 days. 31.NNN Company will receive and record cash of 32.Assuming all receivables are collected, NNN Company’s cost of factoring the receivables woul
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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.
NNN Company factored P5,000,000 of
31.NNN Company will receive and record cash of
32.Assuming all receivables are collected, NNN Company’s cost of factoring the receivables would be
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