Note is paid by maker on maturity

If the note is paid by the maker to the first bank, the liability for note receivable discounted and note
receivable are derecognized.

Liability for note receivable discounted 2,400,000

Note receivable 2,400,000

Note is dishonored by maker

The note is dishonored by the maker on august 1, and the entity pays the first bank the maturity value
of the note, P2,544,000 plus protest fee and other bank charges of P6,000.

Journal entries

1. To record the payment to first bank;

Accounts receivable 2,550,000
Cash 2,550,000
2. To recognize the liability for note receivable discounted and note receivable;
Liability for note receivable discounted 2,400,000
Note receivable 2,400,000