Receivable Financing Problems Part 1 PDF

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Problem and Solutions 1) On July 1, 2018, Wang Company sold goods in exchange for P2,000,000, 8-month, noninterestbearing note receivable for time of the sale, the note's market rate of interest was 12 %. At the amount did Lee receive when it discounted the note at 10% on September 1, 2018? a. 1,940,000 b. 1,938,000 c. 1,900,000 d. 1,880,000 Solution: Principal Less: Discount (2,000,000 x 10% x 6/12) Net proceeds Net proceeds Answer: C

2,000,000 100,000 1,900,000

2) On June 30, 2018, Mari Company discounted at the bank a customer's P6, 000,000, 6-month, 10% note receivable dated April 30, 2018. The bank discounted the note at 12% without recourse. 1. What is the amount received from the note receivable discounting? a. 5,640,000 b. 5,760,000 C. 6,048,000 d. 6,174,000 2. What is the loss on note receivable discounting? a. 252,000 b. 152,000 c. 52,000 d. 48,000 Solutions: 1) Principal Add: Interest (6,000,000 x 10% x 6/12) Maturity value Less: Discount (6,300,000 x 12% x 4/12) Net proceeds Answer: C 2) Principal Accrued Interest receivable (6,000,000 X JO% X 2/12) Carrying amount of note receivable

6,000,000 300,000 6,300,000 252,000 6,048,000

6,000,000 100,000 6,100,000

Net proceeds Carrying amount of note receivable Loss on note receivable discounting Answer: C

6,048,000 6,100,000 52,000

3) Hao Company accepted from a customer P 1,000,000 face amount, 6-month, and 8% note dated April 15, 2018. On the same date Apex discounted the note without recourse at Inter Bank at a 10% discount rate. 1. What amount of cash was received by Apex from the discounting? a. 1,040,000 b. 990,000 c. 988, 000 d. 972,000 2. What is the loss on note receivable discounting? a. 50,000 b. 40,000 c. 52,000 d. 12,000 Solutions: 1) Principal Add: Interest (1, 000,000 x 8% x 6/12) Maturity value Less: Discount {1,040,000 x 10% x 6/12) Net proceeds Answer: C 2) Net proceeds Carrying amount of note receivable - equal to principal Loss on note receivable discounting Answer: D

1,000,000 40,000 1,040,000 52,000 988,000

988,000 1,000,000 (12,000)

4) On July 1, 2017, Faye Company sold equipment to Raul Company for P 1,000,000. Faye accepted a 10% note receivable for the entire sales price. This note is payable in two equal installments of P 500, 000 plus accrued interest on December 31, 2017 and December 31, 2018. On July 1, 2018, Kay discounted the note at a bank at an interest rate of 2%. What is the amount received by Kay Company from the discounting of note receivable? a. 484,000 b. 493,500

c. 503,500 d. 517,000 Solution: Principal Add: Interest (500,000 x 10%) Maturity value Less: Discount (550,000 x 12% x 6/12) Net proceeds Answer: D

500,000 50,000 550,000 33,000 517,000...