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Friends,
BPP Revision kit (for 2010 dec exam)Q No: 12 “Special Gift Suppliers” is causing much pain especially 2nd and 5th adjustments.
I am blank on 5th adjustment as I coudnt understand why interest on 25000 rather than 25000 is taken for calculation in the answer.
Adjustment no:2 – I assume that,since 80% advance is given ,interest is calculated for ONE MONTH just because receivable days were reduced to one month and so the advance amount would have been received within one month if no factor was selected.
Also , 20% amount’s interest is calculated for one month because of receivable days reduced to 1 month. Could anyone correct me if I am wrong with these 2 assumptions ?
For adjustment no:5 , please I would like to have a detailed but simple clarification, thanks in advance.
Regards
Jaison PhilipThe €25,000 is a one time payment that lasts an undetermined amount of time so in essence it’s like investing in an asset that doesn’t depreciate – rather than covering one year of the factoring services it covers the total amount of time the company decides to use the factoring provider. Thus the annual charge is just the amount it costs to finance the “investment” in the factoring you wouldn’t use the total amount unless it was an annual payment.
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