10. 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 finance company charged 12% Interest computed on a weighted average time to maturity of the accounts receivable for 60 days. What total amount should be recognized initially as loss on factoring? A. 398,630 B. 898,630 C. 800,000 D. 648,630 11. What amount should be reported as loss on factoring assuming the accounts are fully collected by the factor? A. 398,630 B. 300,000

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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10. 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 finance company charged 12% Interest computed on a weighted average time to maturity of the
accounts receivable for 60 days.
What total amount should be recognized initially as loss on factoring?
A. 398,630
B. 898,630
C. 800,000
D. 648,630
11. What amount should be reported as loss on factoring assuming the accounts are fully collected by the factor?
A. 398,630
B. 300,000
C. 550,000
D. 400,000
Transcribed Image Text:10. 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 finance company charged 12% Interest computed on a weighted average time to maturity of the accounts receivable for 60 days. What total amount should be recognized initially as loss on factoring? A. 398,630 B. 898,630 C. 800,000 D. 648,630 11. What amount should be reported as loss on factoring assuming the accounts are fully collected by the factor? A. 398,630 B. 300,000 C. 550,000 D. 400,000
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