ny withheld 5% of the purchase price as protection against sales returns and allowances. Sale

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Alaska Company finances some of its current operations by factoring its accounts receivable to a finance company. On July 1, 2021, the company factored $2,000,000 of its accounts receivable to GMA Company. Purchase price was 85% of the receivables factored. GMA Company withheld 5% of the purchase price as protection against sales returns and allowances. Sales returns recorded by Alaska Company on the factored accounts receivable totaled P30,000; the balance of the factor's holdback was settled by the finance company on August 31, 2021.


QUESTION:
a.)  What was the net cash received by Alaska Company from these factored accounts?

b.) Give the entries in the books Alaska Company to record the foregoing in the months of July and August 2021.

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