3. Dairy Company sold accounts receivable without recourse with face amount of P6,000,000. The factor charged 15% commission on all accounts receivable factored and withheld 10% of the accounts factored as protection against customer returns and other adjustments.

The entity had previously established an allowance for doubtful accounts of P200,000 for these accounts. By year-end, the entity had collected the factor’s holdback there being no customer returns and other adjustments.

3.1 What amount of cash was initially received from factoring?

a. P4,500,000 b. 5,400,000 c. 5,100,000 d. 6,000,000

3.2 What is the loss on factoring?

a. P700,000 b. 900,000 c. 200,000 d. 0