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. * GHI Company factored P6,000,000 of accounts receivable to a finance entity atthe beginning of current year. Control was surrendered by DEF Company. Thefactor accepted the accounts receivable subject to recourse for nonpayment.The fair value of the recourse obligation is P100,000. The factor assessed a feeof 3% and retained a holdback equal to 5% of the accounts receivable. Inaddition, the factor charged 15% interest computed on a weighted average timeto maturity of the accounts receivable of 54 days. Compute the amount of cashinitially received from the factoring. *Your answer

Time value of money: Time value of money refers to the concept that the value of money available at…

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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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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. *

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