ABC Co. factored 100,000 accounts receivable to XYZ Financing Corp. on a without recourse

basis on January 1, 20x1. XYZ charged a 4% service fee and retained a 10% holdback to cover

expected sales returns. In addition, XYZ charged a 12% interest computed on a weighted average

time to maturity of the receivables of 73 days based on 365 days.

5. How much proceeds is received from the factoring on January 1, 20x1?

6. How much is the cost of factoring assuming all of the receivables have been collected?

7. On April 1, the AIM Inc. assigned 800,000 of accounts receivable to a bank under a

nonnotifcation arrangement. The bank advances 80% less a service charge of 5,000. AIM Inc.

signed a promissory note that provides for interest of 1% per month on the unpaid balance. On

April 5, AIM Inc. issued a credit memo for sales return to a customer whose account was assigned

for 50,000. On April 10, the company collected 300,000 of the assigned accounts less 2%

discount. On April 30, AIM Inc. remitted the total collections to the bank plus interest for 1 month.

On May 7, 30,000 worth of assigned accounts proved to be worthless. On May 20, AIM Inc.

collected 300,000 of the assigned accounts. On May 30, the company remitted the total amount

due the bank to pay off the loan balance plus interest for one month. What is the remaining

balance of assigned accounts receivable to be transferred back to unassigned accounts

receivables?

8. BPI Inc. provides financing to other companies by purchasing their accounts receivable on a

non-recourse basis. BPI Inc. charges its clients a commission of 15% on all receivables factored.

In addition, BPI withholds 10% of receivables factored as protection against sales return and other

adjustments. BPI Inc. credits the 10% withheld to Clients Retainer Account and makes payments

to clients at the end of each month so that the balance in the retainer is equal to 10% of unpaid

receivables at the end of the month. Experience has led BPI Inc. to establish an allowance for

bad debts accounts of 4% of all unpaid receivables purchased. On December 31, 2014, BPI

purchased receivables from DLSL Inc. totaling 5,000,000. DLSL Inc. had previously established

an allowance for bad debts for these receivables at P200,000. By December 31, BPI Inc. had

collected 4,000,000 on these receivables.

What is the amount of cash received by DLSL Inc. as a result of factoring?

9. What is the gain/(loss) on factoring to be recognized by DLSL Inc.?

10. On July 1, 2019, AWIT Inc. received a 180-day P1,000,000 note receivable from its customer

with 10% interest. Due to financial difficulties, AWIT Inc. discounted the said notes receivable to

RCBC Inc. on August 15, 2014 at a 15% discount rate. What is the net proceeds from the note

discounting to be received by AWIT Inc.? (Assume 360-day)

11. What is the gain/(loss) on note receivable discounting to be recognized by AWIT Inc.?

12. On December 1, 2019, SAYAW Inc. received a 2-year, P2,000,000 non-interest bearing note

from its customer. Due to financial difficulties, SAYAW Inc. discounted the said notes to UCPB

Inc. on December 31, 2019 at a 10% discount rate. The applicable discount rate for the similar

note is 12%. What is the net proceeds from the note discounting to be received by SAYAW

Inc.?(Assume 360-day)

13. On July 1, AIG Inc. assigned P2,000,000 of accounts receivable to a bank under a notification

arrangement. The bank loans 50% less 4% charge on the gross amount assigned. AIG Inc. signed

a promissory note that provides 2% interest per month on the unpaid loan balance. On July 31,

AIG Inc. received notice from the bank that P800,000 of the assigned accounts were collected

less 5% discount. A check was sent to the bank for the interest. On August 31, AIG Inc. received

notice from the bank that P500,000 of the assigned accounts were collected. Final settlement was

made by the bank for the excess collections together with uncollected assigned accounts of

P700,000. What is the amount of cash received from the bank in the final settlement?

14. On July 1, 20x1, ABC Co. discounted an 800,000, 90-day, 12% note, received from a

customer on June 1, 20x1, with a bank at 16% on with recourse basis. The discounting is

treated as conditional sale. The bank uses 365 days per year in computing for discounts. On

August 30, 20x1 (maturity date), the maker of the note defaulted and the bank charged ABC

Co. the maturity value of the note plus a 3,000 protest fee. How much is transferred to

accounts receivable due to the dishonor and before impairment testing?

15. On July 1, 20x1, ABC Co. discounted its own note of 200,000 to a bank at 10% for one year.

How much was the net proceeds received by ABC from the transaction?