Problem 7-11 In 2017, Ayayai Corp. required additional cash for its business. Ma
ID: 341792 • Letter: P
Question
Problem 7-11 In 2017, Ayayai Corp. required additional cash for its business. Management decided to use accounts receivable to raise the additional cash and has asked you to determine the income statement effects of the following transactions: 1. On July 1, 2017, Ayayai assigned $444,000 of accounts receivable to Provincial Finance Corporation as security for a loan. Ayayai received an advance from Provincial 2. On December 1, 2017, Ayayai sold $222,000 of accounts receivable to Bramble Corp. for $204,000. The receivables were sold outright on a without recourse basis and 3. On December 31, 2017, an advance of $89,000 was received from First Bank by pledging $118,000 of Ayayai's accounts receivable. Ayayai's first payment to First Bank is Finance of 90% of the assigned accounts receivable less a commission of 3% on the advance. Before December 31, 2017, Ayayai collected $163,000 on the assigned accounts receivable, and remitted $172,210 to Provincial Finance. Of the latter amount, $9,210 was interest on the advance from Provincial Finance Ayayai has no continuing interest in the receivables. due on January 30, 2018. Show the income statement effects of these transactions for the year ended December 31, 2017. Ayayai Corp. INCOME STATEMENT EFFECT For the year ended December 31, 2017 Expenses resulting from accounts receivable assigned Loss resulting from accounts receivable sold Total expensesExplanation / Answer
Calculation Advance Amount Amount Expenses resulting from accounts receivables assigned = 3% commission on advance 399600 11988 Interest 9210 Total 21198 Loss resulting from accounts recievable sold 18000 Total Expenses 18000