GHI Company factored P6,000,000 of accounts receivable to a finance entity at the beginning of current year. Control was surrendered by DEF Company. The factor accepted the accounts receivable subject to recourse for nonpayment. The fair value of the recourse obligation is P100,000. The factor assessed a fee of 3% and retained a holdback equal to 5% of the accounts receivable. In addition, the factor charged 15% interest computed on a weighted average time to maturity of the accounts receivable of 54 days. Compute the amount of cash initially received from the factoring. *
Transcribed Image Text:GHI Company factored P6,000,000 of accounts receivable to a finance entity at
the beginning of current year. Control was surrendered by DEF Company. The
factor accepted the accounts receivable subject to recourse for nonpayment.
The fair value of the recourse obligation is P100,000. The factor assessed a fee
of 3% and retained a holdback equal to 5% of the accounts receivable. In
addition, the factor charged 15% interest computed on a weighted average time
to maturity of the accounts receivable of 54 days. Compute the amount of cash
initially received from the factoring. *
Your answer
Definition Definition Money that the business will be receiving from its clients who have utilized the credit provided to buy its goods and services. The credit period typically lasts for a short term, lasting from a few days, a few months, to a year.
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