Ramirez, Christine Marie T. BSA 2201 Receivable Financing PDF

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Summary

RAMIREZ, Christine Marie T. BSA 2201I. Twin Company provided the following Information:Dec. 1 Assigned P1,500,000 of accounts receivable to a bank on a nonnotification basis in consideration for a loan. The bank advanced P1,300,000 less a service charge of P50,000. The entity signed a promissory not...

Description

RAMIREZ, Christine Marie T. BSA 2201 I.

Twin Company provided the following Information:

Dec. 1 Assigned P1,500,000 of accounts receivable to a bank on a nonnotification basis in consideration for a loan. The bank advanced P1,300,000 less a service charge of P50,000. The entity signed a promissory note bearing interest of 1% per month on the unpaid loan balance. 31

Collected assigned accounts of P1,000,000 less sales discount of P30,000

31 Remitted the collection to the bank in payment first for the interest and the balance to the principal

Required: (10points) a. Prepare the journal entries to record the transactions Dec. 1 Accounts Receivable- assigned Accounts Receivable 1

31

31

Cash Service Charge Note Payable- Bank

P 1,500,000 P 1,500,000 1,250,000 50,000 1,300,000

Cash Sales Discount Accounts Receivable- assigned

970,000 30,000

Interest Expense (1% x 1,300,000) Note Payable- Bank Cash

13,000 957,000

1,000,000

970,000

b. Indicate the classification and disclosure of the accounts related to the assignment on December31. • The balance of accounts receivable- assigned which is P500,000 should be classified as current asset and included in trade and other receivables. • The note payable- bank amounting to P343,000 should be classified and presented as current liability. • The entity shall disclose its equity in the assigned accounts determined as follows: Accounts Receivable- assigned P500,000 Note Payable- Bank (343,000) Equity in assigned accounts P157,000

II. Gem Company provided the following transactions for the current year. June 1

Sold merchandise to a customer for P500,000, terms 2/10, n/30

3

Factored the account to a bank. The bank charged 5% commission and 25% Holdback

9

Granted the customer a credit allowance of P50,000 for damage in the shipment

11

The customer paid in full its account to the bank

15

Final settlement was made with the bank

Required: (5points) Prepare journal entries to record the transactions. Jun. 1 Accounts Receivable Sales 3

9

Cash Sales Discount (2% x 500,000) Commission (5% x 500,000) Receivable from factor (25% x 500,000) Accounts Receivable Sales Return and Allowance Sales Discount (2% x 50,000) Receivable from factor

11

No entry

15

Cash (125,000 - 49,000) Receivable from factor

P 500,000 P 500,000 340,000 10,000 25,000 125,000 500,000 50,000 1,000 49,000

76,000 76,000

III.

Andrei Company provided the following transactions:

Jan. 1

The entity sold merchandise for P500,000 accepting a note for six months with interest to be paid at maturity at 12%

Mar. 1

The entity discounted the note without recourse at local bank at 15%

July 1

The customer paid the bank in full

Required: (5points) Prepare journal entries to record the transactions. Jan. 1 Notes Receivable Sales Mar 1

Jul, 1

Cash** Loss on discount **** Notes Receivable * Interest Income ***

P 500,000 P 500,000 503,500 6,500 500,000 10,000

No entry

Computation: March 1 Principal* Interest (500,000x12%x6/12) Maturity Value Discount (530,000x15%x4/12)

P500,000 30,000 P530,000 (26,500)

Net**

P503,500

Principal Accrued Interest Receivable (500,000x12%x2/12)***

P500,000 10,000

Notes Receivable- carrying amount

P510,000

Net Less: Notes Receivable- carrying amount

P503,500 P510,000

Loss on note discounting****

P6,500

IV. On August 31, 2020, Marco Company discounted with recourse a customer’s note at the bank at a discount rate of 15%. The note was received from the customer on August 1, 2020, term 90 days, had a face amount of P5,000,000, and carried an interest rate of 12%. The customer paid the note to the bank on October 30, 2020, the date of maturity. Required: (10 points) Prepare journal entries related to the discounting of note receivable, assuming the discounting is accounted for as a.) secured borrowing; b.) conditional borrowing. Secured Borrowing: Aug. 1 Cash** P 5,021,250 Interest Expense**** 28,750 Liability for note receivable discounted* P 5,000,000 Interest Income*** 50,000 Oct.30

Liability for note receivable discounted Note Receivable Conditional Borrowing: Aug. 1 Cash** Loss on note receivable discounting**** Note receivable discounted* Interest Income*** Oct.30

Note receivable discounted Note Receivable

5,000,000 5,000,000 P 5,021,250 28,750 P 5,000,000 50,000 5,000,000 5,000,000

Computation: Principal* Interest (5,000,000x12%x90/360)

P5,000,000 150,000

Maturity Value

P5,150,000

Discount (5,000,000x15%x60/360)

(128,750)

Net**

P5,021,250

Principal Accrued Interest Receivable (5,000,000x12%x30/360)***

P5,000,000 50,000

Notes Receivable- carrying amount

P5,050,000

Net Less: Notes Receivable- carrying amount

P5,021,250 5,050,000

Loss on note discounting****

P28,750...