Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Due to the COVID-19 pandemic the entity has experienced reduced operating margins and liquidity concerns. As part of their process to manage liquidity concerns, they

Due to the COVID-19 pandemic the entity has experienced reduced operating margins and liquidity concerns. As part of their process to manage liquidity concerns, they have considered factoring their accounts receivable (debtors book). Below is an extract from the notes to GOLs financial statements as at 31 July 2020:

Description

2020 (R)

Trade Debtors

2 000 000

Provision for Doubtful Debts

(150 000)

Prepayments

200 000

Trade and Other Receivables

2 050 000

GOL has approached DBC Bank for assistance with the factoring transaction. Below is a brief summary of the banks terms:

1.) DBC will give 80% of the value of accounts receivable as at 31 July 2020 to GOL. The remaining 20% will be recovered by DBC and paid over to GOL.

2.) The fee is 7.5% of the accounts receivable amounted stated above.

In terms of International Financial Reporting Standards (IFRS) 9: Financial Instruments, discuss how accounts receivable should be measured in GOLs financial statements. In addition, provide the initial journal entry (debit/s and credit/s) if GOL decided to enter into the (14)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Montgomerys Auditing Classic Reprint Series

Authors: Robert Hiester Montgomery

1st Edition

1390439356, 978-1390439359

More Books

Students also viewed these Accounting questions

Question

What lessons in intervention design, does this case represent?

Answered: 1 week ago