Answered: What total amount should be recognized…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Ebasan Company factored P5,000,000 of accounts receivable. Control was surrendered by the entity. 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 firance company charged 12% Interest computed on a welghted average time to maturity af the accounts receivable for 60 days. What total amount should be recognized initially as loss on factoring?

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