Thunder Company factored P5,000,000 of accounts receivable. Control was surrendered by Thunder. The transaction met the criteria to be accounted for as sale but subject to recourse for nonpayment. The fair value of the recourse obligation is P250,000. The finance company assessed a fee of 6% and retained a holdback equal to 10% of the accounts receivable. In addition, the finance company charged 12% interest computed on a weighted average time to maturity of the accounts receivable for 30 days. What amount should be reported as loss on factoring assuming the accounts are fully collected by the factor?
Thunder Company factored P5,000,000 of accounts receivable. Control was surrendered by Thunder. The transaction met the criteria to be accounted for as sale but subject to recourse for nonpayment. The fair value of the recourse obligation is P250,000. The finance company assessed a fee of 6% and retained a holdback equal to 10% of the accounts receivable. In addition, the finance company charged 12% interest computed on a weighted average time to maturity of the accounts receivable for 30 days. What amount should be reported as loss on factoring assuming the accounts are fully collected by the factor?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Thunder Company factored P5,000,000 of accounts receivable. Control was
surrendered by Thunder. The transaction met the criteria to be accounted for as sale
but subject to recourse for nonpayment. The fair value of the recourse obligation is
P250,000.
The finance company assessed a fee of 6% and retained a holdback equal to 10% of
the accounts receivable. In addition, the finance company charged 12% interest
computed on a weighted average time to maturity of the accounts receivable for 30
days.
What amount should be reported as loss on factoring assuming the accounts are fully
collected by the factor?
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