Starlight Ltd. assigned $600,000 of Accounts Receivable to Moonbeam Management as security for a loan of $580,000. Moonbeam charged a 3% commission on the amount of the loan; the interest rate on the loan was 10%. During the first month, Starlight collected $320,000 of the assigned accounts, after deducting $500 of discounts. As well, Starlight accepted returns worth $2,600 and wrote off assigned accounts totalling $4,500. The amount of cash Starlight received from Moonbeam at the time of the transfer was

Question

Quizplus · Accepted Answer

Moonbeam charged a commission of 3% on the loan amount of $580,000, which is 580,000 x 0.03 = $17,400. This commission was deducted from the loan amount, so Starlight received $580,000 - $17,400 = $562,600 in cash from Moonbeam.

During the first month, Starlight collected $320,000 of the assigned accounts, but deducted $500 in discounts, so they received $319,500 in cash from these collections. They also accepted returns worth $2,600 and wrote off $4,500 of the assigned accounts. As a result, their net collections were $319,500 - $2,600 - $4,500 = $312,400.

Therefore, the total amount of cash Starlight received from Moonbeam and from their collections during the first month was $562,600 + $312,400 = $875,000.