CH 3 Answers Fin Acc 1

CHAPTER 3 - RECEIVABLES
3-1.
a.
b.
c.
d.
e.
f.
g.
h.
i.
j.
k.
l.
m.
n.
o.
p.
3-2.
Accounts Receivable
Receivables from Employees (part of non-trade receivables) current assets
Advances to Suppliers Current assets or deduction from Accounts Payable to the same
supplier
Accounts Receivable
Customers Accounts with Credit Balances Current Liabilities
Cost of merchandise must be included in inventories
Accounts Receivable
Subscriptions Receivable current asset if collectible within 12 months; otherwise, noncurrent asset or deduction from Shareholders Equity
Other Non-Trade Receivables Current asset or non-current asset depending on terms of
payment
Advances to Suppliers Current Assets
Suppliers Accounts with Debit Balances or Advances to Suppliers Current assets
Accounts Receivable
Claims for Income Tax Refund Current Assets
Accounts Receivable, amount of loan presented separately as part of liabilities
Accounts Receivable
Not recognized anymore (for write off)
(Ginoo Company)
Gross Method
Dec. 9 Accounts Receivable-First Lady
Sales
80,000 x 90% x 95%
10
19
26
31
2014
Jan. 5
19
68,400
Accounts Receivable-Mens World

Sales
50,000
Cash
Sales Discounts
Accounts Receivable-First Lady
67,032
1,368
Accounts Receivable-Teens Kingdom

Sales
40,000
Sales Discounts
Allowance for Sales Discounts
50,000
68,400
40,000
800
800
Cash
Allowance for Sales Discounts
39,200
800
Cash
50,000
Net Method
Sales
68,400 x .0.98
10
68,400
40,000
50,000
67,032
67,032

Sales
49,000
Cash
67,032
49,000
67,032
Chapter 3 Receivables
Dec. 26
31
2014
Jan. 5
9

Sales
Sales Discount Forfeited
Dec. 19
26
31
39,200
1,000
1,000
Cash
Accounts Receivable Teens Kingdom
39,200
Cash
50,000
Allowance Method
Allowance for Sales Discount
Sales
10
39,200
39,200
50,000
68,400
1,368
67,032

Sales
50,000
Cash
67,032
1,368

Sales
40,000

Sales Discount Forfeited
1,000
49,000
68,400
800
39,200
1,000
1,000
2014
Jan. 5
3-3.
Cash
39,200
800
Cash
50,000
(Colleco Supermarket)
June 1- Accounts Receivable Citibank
30 Cash
Accounts Receivable Metrobank
Credit Card Service Charges
Sales
Cash
40,000
50,000
2,450,000
1,764,000
1,470,000
116,000
5,800,000
3,234,000
Accounts Receivable - Citibank

Accounts Receivable - Metrobank
3-4.
(Colayco Company)
(1)
July 14 Allowance for Doubtful Accounts
Accounts Receivable-Moret Co.
31
Notes Receivable
Sales
2,156,000
1,078,000
10,000
10,000
12,000
12,000
13
Aug. 15
Nov.
Nov. 4
5
Nov. 9
Nov. 15
15
Dec. 13
3-5.
Cash
Notes Receivable
Sales
20,000
15,000
Cash
Credit Card Service Charge
Sales
4% x 20,000 = 800
19,200
800
Accounts Receivable-P. Noval

Notes Receivable
Interest Revenue
12,000 x .10 x 90/360 = 300
12,300
35,000
20,000
12,000
300
Accounts Receivable-Credit Card

Sales
9,000
Cash
Credit Card Service Charge
Accounts Receivable-Credit Card
5% x 9,000 = 450
8,550
450
9,000
9,000

Allowance for Bad Debts
10,000
Cash
10,000
Cash
Notes Receivable
Interest Revenue
15,000 x 12% x 120/360 = 600
15,600
10,000
10,000
15,000
600
(Format Company)
a.
b.
Carrying value of the note on January 1, 2013

P6,000,000 x 0.6575
Prevailing interest rate
Interest revenue for 2013
P3,945,000
15%
P 591,750
Carrying value, January 1, 2013

Add amortization of discount during 2013
Carrying value, December 31, 2013
P3,945,000
591,750
P4,536,750
(or simply P3,945,000 x 1.15 = P4,536,750)

3-6.
(Formatted Company)
a.
b.
Carrying value of the note on January 1, 2013 (P2 M x 2.2832)

Interest rate
P4,566,400
15%
P 684,960

4,566,400 + 684,960 2,000,000
Interest rate
P3,251,360
15%
P 487,704
Carrying value, January 1, 2013

Add amortization of discount during 2012
Less first payment of principal
P4,566,400
684,960
(2,000,000)
P3,251,360
14
3-7.
3- 8.
(HRV Company)
(a)
September 30, 2014 (1,000,000)+(3,000,000 x 12%)

September 30, 2015 (1,000,000)+(2,000,000 x 12%)
September 30, 2016 (1,000,000)+(1,000,000 x 12%)
P1,360,000
P1,240,000
P1,120,000
(b)
January 1 September 30, 2014 (260,000 x 9/12)

October 1 December 31, 2014 (240,000 x 3/12)
Total interest revenue for 2014
P 270,000
60,000
P 330,000
(c)
As of December 31, 2013

Notes receivable
Interest receivable (360,000 x 3/12)
Non-current
P2,000,000
Current
P1,000,000
90,000
(Pinky Pop Company)

The note is interest-bearing, but the rate of interest of the note (5%) is unreasonably lower than
the prevailing rate (10%) for similar obligation. The present value of the note is determined as
follows:
2.5 M + (5% x 7.5 M)
2,875,000
x
0.9091
P2,613,663
2.5 M + (5% x 5.0 M) = 2,750,000
x
0.8264
2,272,600
2.5 M + (5% x 2.5 M) = 2,625,000
x
0.7513
1,972,163
Total
P6,858,426
or
2.5 M x 2.4869
(5% x 7.5 M) x 0.9091
(5% x 5.0 M) x 0.8264
(5% x 2.5 M) x 0.7513
Total
(a)
Amortization Table
Payment of
Interest
Date
Principal
Paid
01/01/13
12/31/13
2,500,000
375,000
12/31/14
2,500,000
250,000
12/31/15
2,500,000
125,000
*difference is due to rounding off
(b)
P6,217,250
340,913
206,600
93,913
P6,858,676
Interest
Revenue
685,843
466,927
238,804*
Amortization
of Discount
310,843
216,927
113,804*
Carrying
Value
6,858,426
4,669,269
2,386,196
------------
Journal entries
2013
Jan. 1
Dec. 31
2014
Dec. 31
2015
Dec. 31
Notes Receivable
Discount on Notes Receivable
Gain on Sale of Land
Land
7,500,000 6,858,426 = 641,574 Discount
6,858,426 6,000,000 = 858,426 Gain
7,500,000
Cash
Interest Revenue
Notes Receivable
2,875,000
310,843
Cash
Interest Revenue
Notes Receivable
2,750,000
216,927
Cash
Interest Revenue
Notes Receivable
2,625,000
113,804
641,574
858,426
6,000,000
685,843
2,500,000
466,927
2,500,000
238,804
2,500,000
15
3-9.
Pinky Pip Company

The note is interest-bearing, but the rate of interest of the note (14%) is unreasonably higher than
the prevailing rate (10%) for similar obligation. The present value of the note is determined as
follows:
2.5 M + (14% x 7.5 M) = 3,550,000
2.5 M + (14% x 5.0 M) = 3,200,000
2.5 M + (14% x 2.5 M) = 2,850,000
Total
or
2.5 M x 2.48685
(14% x 7.5 M) x
(14% x 5.0 M) x
(14% x 2.5 M) x
Total
x
x
x
0.9091
0.8264
0.7513
P3,227,305
2,644,480
2,141,205
P8,012,990
P6,217,125
954,555
578,480
262,955
P8,013,115*
0.9091
0.8264
0.7513
*Difference in the computation is due to rounding off of present values

a.
Amortization Table
Date
01/01/13
12/31/13
12/31/14
12/31/15
Payment of
Principal
2,500,000
2,500,000
2,500,000
Interest
Paid
1,050,000
700,000
350,000
Interest
Revenue
801,299
526,429
259,282*
Amortization
of Premium
248,701
173,571
90,718*
Carrying
Value
8,012,990
5,264,289
2,590,718
------------
*Difference is due to rounding off

b.
2013
Jan. 1
Dec. 31
2014
Dec. 31
2015
Dec. 31
Journal entries
Notes Receivable
Premium on Notes Receivable
Gain on Sale of Land
Land
8,012,990 7,500,000 = 512,990 Premium
8,247,955 6,000,000 = 2,247,955 Gain
7,500,000
512,990
Cash
Interest Revenue
Notes Receivable
3,550,000
Cash
Interest Revenue
Notes Receivable
3,200,000
Cash
Interest Revenue
Notes Receivable
2,850,000
16
2,012,990
6,000,000
248,701
801,299
2,500,000
173,571
526,429
2,500,000
90,718
259,282
2,500,000
3-10.
(Word Company)
Uncollectible Accounts Expense
Allowance for Uncollectible Accounts
P52,000
50,000
Required balance in allowance account:

(2% x 500,000) + (10% x 200,000) + (20% x 100,000)
Reported balance in allowance before adjustments (debit)
Required adjustment charged to uncollectible accounts expense
3-11.
P50,000
2,000
P52,000
(Edit Company)
Allowance for Uncollectible Accounts, beg
Recovery of accounts previously written off
Uncollectible accounts expense for 2013
Allowance for Uncollectible Accounts, end
Accounts written off during 2013
3-12.
P 6,000
3,000
48,000
(12,000)
P45,000
(Toyota Products, Inc.)

a.
b.
c.
d.
e.
f.
g.
h.
Accounts receivable
Sales
4,800,000
Cash
Sales discounts
Accounts receivable
3,920,000
80,000
4,800,000
4,000,000
Allowance for uncollectible accounts

Accounts receivable
20,000
20,000
Accounts receivable
Allowance for uncollectible accounts
5,000
Cash
Accounts receivable
5,000
Notes receivable
Accounts receivable
25,000
Cash
Notes payable-bank
400,000
Cash
Accounts receivable
150,000
Notes payable-bank
Cash
150,000
5,000
5,000
25,000
400,000
150,000
150,000

9,000 20,000 + 5,000 = 6,000 debit
59,000 + 6,000 = 65,000
Interest receivable
Interest revenue
25,000 x 12% x 30/360
65,000
65,000
250
250
Accounts receivable
(450,000+4,800,0004,000,00020,00025,000150,000)
Less Allowance for uncollectible accounts
Amortized cost of accounts receivable
17
P1,055,000
59,000
P 996,000
3-13.
(Rav, Inc.)
Accounts Receivable, December 31, 2012
Sales on account during 2013
Cash received from customers
Cash discounts allowed: (882,000 98%) x 2%
(495,000 99%) x 1%
Recovery of accounts written off
Accounts written off as worthless
Credit memoranda for sales returns
P 337,000
1,500,000
(1,600,000)
P18,000
5,000
Allowance for Uncollectible Accounts, December 31, 2012

Recovery of accounts written off
Impairment loss on receivables
(23,000)
3,000
(11,000)
(6,000)
P 200,000
P 12,000
3,000
(11,000)
15,000
P 19,000
The computation may also be conveniently done through T-accounts, as follows:

Balance, beg
Sales on account
Recovery
Total
Balance, end
Write off
Total
3-14.
Accounts Receivable
337,000 Collections
1,500,000 Cash discounts
3,000 Write off
Sales returns
1,840,000 Total
200,000
11,000 Balance, beg
Recovery
Impairment
11,000 Total
Balance, end
12,000
3,000
15,000
30,000
19,000
(Revo Company)
Allowance for Uncollectible Accounts, January 1, 2013
Accounts written off
Additional accounts written off
before adjustments (debit balance)
Required balance in Allowance account based on aging:
(5% x 240,000) + (25% x 20,000) + (50% x 30,000) + (90% x 24,000)
Required adjustment/Uncollectible Accounts Expense for 2013
Less Allowance for Uncollectible Accounts
Net amortized cost
3-15.
1,600,000
23,000
11,000
6,000
1,640,000
P 34,000
(47,000)
7,000
(6,000)
(P12,000)
53,600
P65,600
P654,000
53,600
P600,400
(Adventure Company)
a.
Required/Adjusted balance of Allowance for Uncollectible Accounts:

20% x 600,000 past due accounts
P 120,000
5% x 1,400,000 current accounts
70,000
Total
P 190,000
18
3-16.
Accounts Receivable, December 31

Past due accounts
Current accounts/Not yet past due
P 2,000,000
600,000
P 1,400,000
Accounts Receivable, January 1

Sales during 2012
Cash collected from customers
Note received in settlement of an account
Accounts Receivable, December 31
P 1,200,000
10,000,000
(8,720,000)
20,000
( 400,000)
( 100,000)
P 2,000,000
b.
Adjusted Allowance for Uncollectible Accounts, end

Accounts written off during the year as worthless
Allowance for Uncollectible Accounts, beg
Uncollectible Accounts Expense for year 2013
P190,000
100,000
(20,000)
(60,000)
P210,000
c.
Accounts Receivable
Less Allowance for Uncollectible Accounts
Amortized cost of accounts receivable, December 31, 2013
P2,000,000
190,000
P1,810,000
(Maynilad Company)
Alternative 1
Carrying value (10 M + 1.2 M)
Present value of future cash inflows:
Principal due on 12/31/15 (9M x 0.7972)
Interest for 2 years
9M x 8% = 720,000; 720,000 x 1.6901
Impairment loss
Entry: Restructured Notes Receivable
Impairment Loss Receivables
Notes Receivable
Interest Receivable
Alternative 2
Carrying value (10 M + 1.2 M)
2M + (8% x 10M) = 2,800,000 x 0.8929
2M + (8% x 8M) = 2,640,000 x 0.7972
2M + (8% x 6M) = 2,480,000 x 0.7118
2M + (8% x 4M) = 2,320,000 x 0.6355
2M + (8% x 2M) = 2,160,000 x 0.5674
Impairment loss
Notes Receivable
Interest Receivable
11,200,000
P7,174,800
1,216,872
8,391,672
2,808,328
10,000,000
1,200,000
11,200,000
2,500,120
2,104,608
1,765,264
1,474,360
1,225,584
9,069,936
2,130,064
9,069,936
2,130,064
Alternative 3
Carrying value
Principal due on 12/31/15
10M x 0.7972
7,972,000
Interest due on 12/31/14 and 12/31/15
10M x 9% = 900,000; 900,000 x 1.6901 1,521,090
Impairment loss
19
8,391,672
P2,808,328
10,000,000
1,200,000
10,000,000
9,493,090
506,910
Notes Receivable
9,493,090
506,910
Cash
Interest Receivable
1,200,000
10,000,000
1,200,000
Alternative 4
Carrying value
Principal due on 12/31/13
11.2M x 0.797193876
Interest due on 12/31/13 and 12/31/14
11.2M x 12% = 1,344,000;
1,344,000 x 1.6900510
Impairment loss
11,200,000
8,928,572
2,271,428
11,200,000
-0-
No entry is required for the restructuring.

3-17. (Kate Company)
(a)
Cash
Notes Payable National Bank
(b)
3-18.
750,000
750,000
Current assets:
Trade and other receivables (including P900,000 of accounts
pledged as collateral for a loan with National Bank)
P2,000,000
Current liabilities:
Notes Payable National Bank
Interest Payable
P 750,000
7,500
(Lexus Company)
Amount of the loan
Less service charge (2% x 800,000)
Net proceeds from the assignment of accounts receivable
Sept. 1
Sept 1-30
P650,000
16,000
P634,000
Accounts Receivable Assigned

Accounts Receivable
800,000
Cash
Finance Charges
Notes Payable Pacific Bank
634,000
16,000
Cash
300,000
800,000
650,000

Sept. 30
Oct. 1-31

Interest Expense (650,000 x 12% x 1/12)
Cash
Cash
300,000
300,000
6,500
306,500
10,000
10,000
400,000

Oct.
31
31
400,000

Interest Expense (350,000 x 12% x 1/12)
Cash
350,000
3,500
Accounts Receivable
100,000
20
353,500
100,000
3-19.
Accord Company)
July 1
1
21
31
Aug. 1
15
31
Sept. 1
1
320.
4,000,000
Cash
Finance Charges
Notes Payable Bank
5% x 3,200,000 = 160,000
3,040,000
160,000
Sales Returns and Allowances

150,000
Cash
Sales Discounts
2% x 2,500,000 = 50,000
2,450,000
50,000
Notes Payable Bank

Interest Expense (3.2M x 0.12 x 1/12)
Cash
2,500,000
32,000

Cash
4,000,000
3,200,000
150,000
2,500,000
2,532,000
50,000
50,000
1,000,000
1,000,000
Notes Payable Bank

Interest Expense (700,000 x 0.12 x 1/12)
Cash
700,000
7,000
Accounts Receivable
300,000
707,000
300,000
(Fortune Company)
Oct. 1
1
31
Nov. 30
3-21.

Accounts Receivable

Accounts Receivable
2,000,000
Cash
Finance Charges
Notes Payable
1,410,000
90,000
2,000,000
1,500,000
Interest Expense (1.5M x 0.12 x 1/12)

Notes Payable
15,000
985,000
Notes Payable
Cash
515,000
5,150
279,850
(Highlander Company)
a.
Sept. 1
Cash
Receivable from Factor
Loss from Factoring
Accounts Receivable
800,000 x 10% =80,000 Loss;
720,000 x 5% = 36,000 withheld
21
1,000,000
800,000
684,000
36,000
80,000
800,000
Nov. 1
b.
Dec. 31
3-22.
3-24.
582,000
18,000
600,000

(190,000 + 1,000,000) x 2% = 23,800 13,400
10,400
10,400
(Hiku Company)
(a)
Selling price of Accounts Receivable 90% x P1,200,000=

Factors holdback (6% x 1,080,000)
Cash received from factoring
P1,080,000
(64,800)
P1,015,200
(b)
Accounts receivable assigned balance (500,000 350,000)

Balance of notes payable to the bank
400,000 (350,000 4,000)
Equity on assigned accounts
P 150,000
P
(54,000)
96,000
Face value of note discounted

Interest for the full term April 30 August 28
(50,000 x 9% x 120/360)
Maturity value
Discount (51,500 x 10% x 88/360)
Proceeds
50,000
(c)
3-23.
Cash
Finance Charges
Notes Payable-Bank
3% x 600,000 = 18,000
P
P
1,500
51,500
(1,259)
50,241
( Edsamail Company)
(a)
Maturity value = 500,000 + (500,000 x .08) = 540,000

Proceeds = 540,000 (540,000 x 0.10 x 5/12) = 517,500
(b)
Interest Receivable
Interest Revenue
500,000 x 8% x 7/12
a.
23,333
23,333
Cash
Loss on Sale of Notes Receivable
Notes Receivable
Interest Receivable
517,500
5,833
Proceeds 90,000 (90,000 x 0.12 x 20/365)
= P89,408
500,000
23,333
Cash
89,408
Liability on Discounted Notes
b.
Maturity value 75,000 + (75,000 x 0.09 x 90/365)

Proceeds 76,664 (76,664 x 0.12 x 50/365)
Cash
89,408
= P76,664
= P75,404
75,404

c.
Maturity value 60,000 + (60,000 x 0.14 x 120/365)

Proceeds 62,762 (62,762 x 0.12 x 45/365)
Cash
75,404
= P62,762
= P61,833
61,833
22
61,833
3-25.
(Crosswind Corporation)
2013
Feb. 1
Apr. 1
Nov. 2
2
3-26.
Notes Receivable
Accounts Receivable
60,000
Cash
60,000 + (60,000 x .10 x 9/12) = 64,500
64,500 (64,500 x .12 x 7/12) = 59,985
59,985

Notes Receivable
Interest revenue (60,000 x 0.10 x 9/12)
59,985
4,515
Accounts Receivable (64,500 + 1,500)

Cash
66,000
60,000
59,985
60,000
4,500
66,000
(Explorer Company)
(a)
Accounts receivable factored
Purchase price
Purchase price of accounts receivable factored
Less amount withheld (5% x 1,700,000)
Net cash received from the factored accounts
(b)
Cash
Loss on Factoring
Accounts Receivable
P2,000,000
85%
P 1,700,000
85,000
P 1,615,000
1,615,000
85,000
300,000
2,000,000
Sales Returns
30,000
Cash
55,000
30,000

3-27.
30,000
(Nature Company)
(a)
1/1/12
(1)
(2)
(3)
(4)
Interest Revenue
Interest Receivable
2,800
2,800
Accounts Receivable
Sales
2,800,000
Cash
Sales Discounts
Accounts Receivable (2,218,000 180,000)*
Accounts Receivable Assigned *
2,200,000
18,000
2,800,000
2,038,000
180,000
Notes Receivable
Accounts Receivable
250,000
Cash
Notes Receivable
Interest Revenue
216,000
250,000
200,000
16,000
23
(5)
(6)
(7)
(8)
(9)
(10)
Cash
41,400

Interest expense
Notes Receivable
Interest revenue
41,400
4,600

Accounts Receivable
300,000
Cash
Finance Charges
Notes Payable
222,000
18,000
41,400
40,000
6,000
300,000
240,000
Accounts Receivable
Notes Receivable
Interest Revenue
15,900

Accounts Receivable
12,000
15,000
900
12,000
Notes Payable
Interest Expense
Cash
180,000
3,000
183,000

20,000 (12,000 12,000 )
20,000
20,000
(11)
Interest Receivable
Interest Revenue
*See item (9)
(b)
3,200
3,200
Trade and Other Receivables
P1,014,100
Trade and Other Receivables include the following:

Notes Receivable
Accounts Receivable Unassigned
Accounts Receivable - Assigned
Interest Receivable
Total
24
95,000
815,900
120,000
3,200
(20,000)
P1,014,100
MULTIPLE CHOICE QUESTIONS
Theory
MC1
MC2
MC3
MC4
MC5
MC6
MC7
MC8
MC9
MC10
A
B
A
A
C
A
D
A
A
C
MC11
MC12
MC13
MC14
MC15
MC16
MC17
MC18
C
C
A
C
A
D
A
C
Problems
MC19
MC20
B
D
MC21
MC22
MC23
MC24
MC25
MC26
MC27
MC28
MC29
C
B
A
D
D
C
D
B
B
MC30
MC31
MC32
MC33
MC34
MC35
MC36
MC37
A
A
B
D
C
C
C
B
MC38
MC39
MC40
MC41
MC42
MC43
MC44
MC45
A
C
B
B
D
C
A
D
*
Date
July 1,
July 1,
July 1,
July 1,
July 1,
450,000 x 1.4 = 630,000; 630,000 585,000 = 45,000

105,000 x .90 = 94,500 (Invoice price/Gross)
94,500 x .98 = 92,610 (net price)
200,000 x .90 x .95 = 171,000 (Invoice price/Gross); 171,000 x .97 = 165,870 (Net)
1,300,000 + 5,400,000 + 25,000 4,750,000 125,000 = 1,850,000
360,000 80% = 450,000; 450,000 + 80,000 430,000 = 100,000
75,000 + 45,000 = 120,000
3% x 1,000,000 = 30,000
30,000 + 8,000 = 38,000
270,000 250,000 = 20,000; 20,000 + 23,000 28,000 5,000 = 10,000
17,500 30,500 + 8,050 + 200,000 = 15,050
480,000 + 2,400,000 2,560,000 17,600 36,800* + 4,800 = 270,400
*1,411,200 .98 = 1,440,000 x 2% = 28,800
792,000 .99 = 800,000 x 1% = 8,000; 28,800 + 8,000 = 36,800
19,200 + 4,800 17,600 = 6,400; 5% x 270,400 = 13,520; 13,520 6,400 = 7,120
(5% x 600,000) + (10% x 40,000) + 14,000 = 48,000
20,000 + 7,500 12,500 3,700 = 11,300
50,000 + (50,000 x 10%) = 55,000; 55,000 (55,000 x .12 x 6/12) = 51,700
400,000 x .75 = 300,000; 300,000 x 10% = 30,000
300,000 + 30,000 = 330,000
1,940,000 x 13.4% x 1/12= 21,663
2,000,000 x 12% x 1/12 = 20,000 (Note: The difference between interest income of
P21,663 and interest receivable of 20,000 is debited to Discount on Notes Receivable).
902,500 (11% x 2,800,000) = 594,500
(308,000 x 6/12) + (242,605 x 6/12) = 275,303 (See complete amortization table below)*
500,000 + (500,000 x 8%) = 540,000; 540,000 (540,000 x 10% x 8/12) = 504,000
1,250,000 - (2% x 1,250,000)} = 1,225,000; 1,225,000 + 695,000 = 1,920,000
(500,000 + 2,200,000) x 3% = 81,000; 81,000 32,000 = 49,000
550,000 [(500,000 x 0.8265) + (40,000 x 1.7355)] = 67,380
5,500,000 [(4,000,000 X .83) + (320,000 X 1.74)] = 1,623,200
(4,000,000 X .83) + (320,000 X 1.74) = 3,876,800
Annual payment
2012
2013
2014
2015
2016
902,500
902,500
902,500
902,500
Interest income
11% x 2,800,000=308,000
11% x 2,205,500=242,605
11% x 1,545,605=170,017
902,500-813,122=89,378
25
Reduction in principal
902,500-308,000=594,500
902,500-242,605=659,895
902,500-170,017=732,483
813,122
Balance
2,800,000
2,205,500
1,545,605
813,122
-0-

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CHAPTER 3 - RECEIVABLES

Accounts Receivable-Mens World

Accounts Receivable-Teens Kingdom

Accounts Receivable-Mens World

Accounts Receivable-Teens Kingdom

Accounts Receivable-Mens World

Accounts Receivable-Teens Kingdom

Allowance for Sales Discount

Accounts Receivable - Citibank

Accounts Receivable-P. Noval

Accounts Receivable-Credit Card

Accounts Receivable-Moret Co.

Carrying value of the note on January 1, 2013

Carrying value, January 1, 2013

(or simply P3,945,000 x 1.15 = P4,536,750)

Carrying value of the note on January 1, 2013 (P2 M x 2.2832)

Carrying value, December 31, 2013

Carrying value, January 1, 2013

September 30, 2014 (1,000,000)+(3,000,000 x 12%)

January 1 September 30, 2014 (260,000 x 9/12)

As of December 31, 2013

(Pinky Pop Company)

Pinky Pip Company

*Difference in the computation is due to rounding off of present values

*Difference is due to rounding off

Required balance in allowance account:

(Toyota Products, Inc.)

Allowance for uncollectible accounts

Uncollectible Accounts Expense

Allowance for Uncollectible Accounts, December 31, 2012

The computation may also be conveniently done through T-accounts, as follows:

Required/Adjusted balance of Allowance for Uncollectible Accounts:

Accounts Receivable, December 31

Accounts Receivable, January 1

Adjusted Allowance for Uncollectible Accounts, end

No entry is required for the restructuring.

Accounts Receivable Assigned

Accounts Receivable Assigned

Notes Payable Pacific Bank

Accounts Receivable Assigned

Notes Payable Pacific Bank

Sales Returns and Allowances

Notes Payable Bank

Allowance for Uncollectible Accounts

Notes Payable Bank

Accounts Receivable Assigned

Accounts Receivable Assigned

Interest Expense (1.5M x 0.12 x 1/12)

Uncollectible Accounts Expense

Selling price of Accounts Receivable 90% x P1,200,000=

Accounts receivable assigned balance (500,000 350,000)

Face value of note discounted

Maturity value = 500,000 + (500,000 x .08) = 540,000

Proceeds 90,000 (90,000 x 0.12 x 20/365)

Maturity value 75,000 + (75,000 x 0.09 x 90/365)

Liability on Discounted Notes

Maturity value 60,000 + (60,000 x 0.14 x 120/365)

Liability on Discounted Notes

Liability on Discounted Notes

Accounts Receivable (64,500 + 1,500)

Receivable from Factor

Liability on Discounted Notes

Accounts Receivable Assigned