Question

Sheffield Corp. assigned $1601000 of accounts receivable to Pharoah Company as security for a loan of $1344000. Pharoah charged a 2% commission on the amount of the loan; the interest rate on the note was 9%. During the first month, Sheffield collected $404000 on assigned accounts after deducting $1480 of discounts. Sheffield accepted returns worth $5400 and wrote off assigned accounts totaling $11910. The amount of cash Sheffield received from Pharoah at the time of the assignment was

Answer 1

Answer:

$1,317,120

Explanation:

Cash received by Sheffield Corporation at the time of assignment = Amount borrowed - Commission paid

= $1,344,000 - ($1,344,000 * 2%)

= $1,344,000 - $26,880

= $1,317,120

So, the amount of cash Sheffield received from Pharoah at the time of the assignment was $1,317,120