PROBLEM 2 (Receivable Financing)

Graciel Corp. had the following receivable financing transactions during the year:

On March 1, 2024, Graciel Corp. factored P 500,000 of its accounts receivables to BPI. As of the date of factoring, it was ascertained that P 20,000 of the accounts receivable is doubtful of collection. BPI advanced P 350,000 cash to Graciel Corp. and withheld P 50,000 as factors holdback to cover future sales discount and sales returns and allowances. The company incurred P 10,000 direct transaction costs (legal fees and other professional fees) related to the factoring. The factoring was done on a without recourse basis, thus transferring all significant risks and rewards associated to the

receivable to BPI.

On May 1, 2024, Graciel Corp. assigned P 800,000 of its outstanding accounts receivable to BPI in consideration of a P 500,000, 24% loan. BPI charged the company 2% of the accounts assigned as service charge. By the end of May, Graciel Corp. collected P 200,000 cash from the assigned accounts net of P 5,000 sales discount. By the end of June, Graciel Corp. collected another P 150,000 from the assigned accounts

after P 4,000 sales discount. The company accepted merchandise originally invoiced at P 30,000 as sales returns and wrote off P 20,000 of the assigned accounts as worthless. It was agreed between parties that monthly collections shall be remitted to the bank as partial payment of the loan and interest.

On July 1, 2024, Graciel Corp. accepted from a customer a 6-month, P 600,000, 12% notes receivable for the sale of merchandise. On October 31, 2024, Graciel Corp. discounted the note to BPI at a discount rate of 10%. The discounting was done on a without recourse basis, thus transferring all significant risks and rewards associated to the receivable to BPI.

Required:

4. How much should be reported as gain/loss in the income statement on the transfer of receivables on the factoring of receivables on March 1?

5. How much should be reported as gain/loss in the income statement on the transfer of receivables on the assignment of receivables on May 1?

6. What is the carrying value of the accounts receivable - assigned as of June

30?

7. What is the carrying value of the loans payable related to the accounts receivable assigned as of June 30?

8. How much should be reported as gain/loss in the income statement on the transfer of receivables on the discounting of the note receivable on July 1?