he following information relates to Zulu Company’s accounts receivable for 20X1: Accounts receivable, 1/1/20X1 $ 750,000 Credit sales for 20X1 3,100,000 Accounts written off during 20X1 45,000 Collections from customers during 20X1 2,400,000 Allowance for credit losses at 12/31/20X1 95,000 A factor has recently offered to purchase all of Zulu’s outstanding receivables without recourse for 94% of their face amount. Required: At what net amount should Zulu report its receivables assuming the company chooses to measure financial assets at fair value?
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At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
The following information relates to Zulu Company’s accounts receivable for 20X1:
| Accounts receivable, 1/1/20X1 | $ | 750,000 | |
| Credit sales for 20X1 | 3,100,000 | ||
| Accounts written off during 20X1 | 45,000 | ||
| Collections from customers during 20X1 | 2,400,000 | ||
| Allowance for credit losses at 12/31/20X1 | 95,000 | ||
A factor has recently offered to purchase all of Zulu’s outstanding receivables without recourse for 94% of their face amount.
Required:
At what net amount should Zulu report its receivables assuming the company chooses to measure financial assets at fair value?
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