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Accounting Practice #9

XOXO Corporation factored $6,000,000 in accounts receivable to KISS Corporation on October 1, 2022. KISS Corporation charged a 3% fee and retained a 5% holdback from the receivables. KISS also charged 15% interest on the receivables over a 54 day period. XOXO Corporation will receive $5,386,850 in cash from the factoring.

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Alexa Lee
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34 views1 page

Accounting Practice #9

XOXO Corporation factored $6,000,000 in accounts receivable to KISS Corporation on October 1, 2022. KISS Corporation charged a 3% fee and retained a 5% holdback from the receivables. KISS also charged 15% interest on the receivables over a 54 day period. XOXO Corporation will receive $5,386,850 in cash from the factoring.

Uploaded by

Alexa Lee
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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ACCOUNTING PRACTICE #9

XOXO Corporation factored P6,000,000 of accounts receivable to KISS Corporation on


October 1, 2022. Control was surrendered by XOXO Corporation. KISS Corporation accepted
the receivables subject to recourse for non-payment. KISS Corporation assessed a fee of 3% and
retains a holdback equal to 5% of the accounts receivable. In addition, KISS Corporation
charged 15%interest computed on a weighted-average time to maturity of the receivables of 54
days. The fair value of the recourse obligation is ₱90,000

1. XOXO Corporation will receive and record cash of:


a. ₱5,296,850 b. ₱5,386,850 c. ₱5,476,850 d. ₱5,556,850

Accounts receivable ₱6,000,000


Factor’s holdback (6,000,000 x 5%) ( 300,000)
Factoring fee (6,000,000 x 3%) ( 180,000)
Interest (6,000,000 x 15% x 54/365) ( 133,150)
Cash received from factoring ₱5,386,850

2. Assuming all receivables are collected, XOXO Corporation’s cost of factoring the
receivables would be:
a. ₱313,150 b. ₱180,000 c. ₱433,150 d. ₱613,150

Factoring fee ₱180,000


Interest 133,150
Total cost of factoring ₱313,150

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