1. Explain Discounting of note receivable.

Discounting (of note receivable) is a form of receivable financing which is

specifically referred to notes receivable. Notes receivable is converted into cash by
selling them to a financial institution at a discount.
Just as accounts receivable can be factored, notes can be converted into cash by
selling them to a financial institution at a discount.

Discount is the amount of interest subtracted by the bank in advance.

9. What is the formula in computing discount? Discount=Maturity Value x
Discount x Time
10. Explain the carrying amount of the note receivable upon discounting.
The carrying amount of the note receivable upon discounting is the principal amount
of loan with the accrued interest receivable.

2. Who are the original parties in a promissory note? Maker and Payee
3. Who are the parties involved after discounting of note receivable? Payee/Endorser
and Financial entity/Endorsee
4. Explain endorsement of a negotiable instrument.
The act of the owner or payee signing his/her name at the back of a negotiable
instrument so as to make it payable to another or cashable by any person.
The act of the owner or payee signing his/her name to the back of a check, bill of
exchange, or other negotiable instrument so as to make it payable to another or
cashable by any person. An endorsement may be made after a specific direction
("pay to Dolly Madison" or "for deposit only"), called a qualified endorsement, or
with no qualifying language, thereby making it payable to the holder, called a
blank endorsement. There are also other forms of endorsement which may give
credit or restrict the use of the check. 2) the act of pledging or committing support
to a program, proposal, or candidate. (See: negotiable instrument).An endorsement
on a negotiable instrument, such as a check or a promissory note, has the effect of
transferring all the rights represented by the instrument to another individual. The
ordinary manner in which an individual endorses a check is by placing his or her
signature on the back of it, but it is valid even if the signature is placed somewhere
else, such as on a separate paper, known as an allonge, which provides a space for
a signature.
5. What is the formula in computing net proceeds from discounting of note
receivable? Net proceeds=Maturity value minus Discount
6. Explain maturity value.
Maturity value is the amount outstanding of the note at the date of its maturity. It
can be express into equation which is Maturity Value = Principal plus interest.
7. What is the formula in vomputing interest on the note receivable?
Interest=Principal x Interest x Time.
8. Explain discount in relation to discounting of note receivable.

11. What is the formula in computing gain or loss on discounting of note receivable?
Gain(Loss) on note discounting = Net proceeds less Carrying amount of note
receivable
12. Explain discounting without recourse.
In discounting without recourse, there is no contingent liability or an obligation to
pay an amount in the future when an uncertain event occurs like when the maker
dishonors the note.
13. Explain discounting with recourse accounted for as conditional sale.
Notes are usually sold (discounted) with recourse meaning, the entity discounting
the note come to an agreement to pay the financial institution if the maker
dishonors the note. The entity has a contingent liability.
A contingent liability is an obligation to pay an amount in the future, if and when
an uncertain event occurs. When notes receivable are sold with recourse, the
company has a contingent liability that must be disclosed in the notes
accompanying the financial statements.
14. Explain discounting with recourse accounted for as secured borrowing.
If the discounting is treated as a secured borrowing, the note receivable is not
derecognized but in..
15. What are the criteria for the derecognition of a financial asset?
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a. The contractual rights to the cash flows of the financial asset have expired.
b. The financial asset has been transferred and transfer qualifies for
derecognition based on the extent transfer of risks and rewards of
ownership.