Problem 8-4

Docile company assigned certain accounts recievable to a bank for a loan on the following basis:
75% cash advance, 4% service charge on gross accounts assigned, 2% interest per month is to be
charged, and the bank makes the collection. The entity signed a promisory note for the loan.

Jul-01 Received remittance upon the specific assignment of P1,500,000 in accounts to the bank.
Aug-01 Received notice from the bank that P800,000 of the assigned accounts were collected.
A check was sent to the bank for one month interest charge.
Sep-01 Received notice from the bank that assigned accounts of P500,000 were collected in full
and the remaining accounts of P200,000 were being returned. Accordingly, a check was
received from the bank in settlement of the assignment contract. In making the settlement,
the bank deducted the interest charge for the corresponding period.

Required:

Prepare Journal entries on the books of the assignor.

Jul-01 Accounts Receivable – assigned 1,500,000.00

Accounts Receivable

Cash 1,065,000.00
Service 60,000.00
Notes payable- Bank

Aug-01 Notes payable- Bank 800,000.00

Accounts Receivable – assigned

Interest expense 22,500.00

Cash

Sep-01 Cash 168,500.00

Interest expense 6,500.00
Notes payable- Bank 325,000.00
Accounts Receivable – assigned

Accounts Receivable 200,000.00

Accounts Receivable – assigned

Problem 8-5

Grateful Company provided the following transactions:

 Jul-01 The entity assigned P500,000 of accounts receivable to its bank on a nonnotification basis in conside
for a loan. On this date, the bank advanced P400,000 less a service charge of 2% of the total accoun
and the entity signed a promissory note bearing interest of 1% per month on the unpaid loan balanc
Aug-01 Collected P330,000 on assigned accounts. The entity remitted this amount to the
bank in payment first for the interest and the balance to the principal.
Sep-01 Collected the remaining balance of assigned accounts. The entity paid off the remaining
loan balance. Required: Prepare journal entries to record the transactions. 

Required:

Prepare Journal entries to record the transactions.

Jul-01 Accounts Receivable – assigned 500,000.00

Accounts Receivable

Cash 390,000.00
Service 10,000.00
Notes payable- Bank

Aug-01 Cash 330,000.00

Accounts Receivable – assigned

Interest expense 4,000.00

Notes payable- Bank 326,000.00
Cash

Sep-01 Cash 170,000.00

Accounts Receivable – assigned

Interest expense 740.00

Notes payable- Bank 74,000.00
Cash

Problem 8-8

Dainty Company sold accounts receivable without recourse with face amount of P6,000,000.
The factor charged 15% commission on all accounts receivable factored and withheld 10% of
the accounts factored as protection against customer returns and other adjustments.

The entity had previously established an allowance for doubtful accounts of

P200,000 for these accounts.
By year-end, the entity had collected the factor's holdback there being no customer
returns and other adjustments.

Required:
Prepare journal entries to record the factoring and the subsequent collection of the factor’s
holdback.

Cash 4,500,000.00
Allowance for doubtful accounts 200,000.00
Recievable from factor 600,000.00
Loss on factoring 700,000.00
Accounts recievable

Cash 600,000.00
Recievable from factor
nts to the bank.
re collected.

ollected in full
y, a check was
ng the settlement,

1,500,000.00

1,125,000.00

800,000.00

22,500.00

500,000.00

200,000.00
otification basis in consideration
of 2% of the total accounts assigned,
on the unpaid loan balance at the beginning of the month.  

the remaining

500,000.00

400,000 - 10,000
500,000 x 2%
400,000.00

330,000.00

40,000 x 1%

330,000.00

170,000.00

74,000 x 1%

74,740.00
 Gross 6,000,000.00
Less: commission (15%x6,000,000) 900,000.00
Factor's holdback (10%x6,000,000) 600,000.00 1,500,000.00
6,000,000.00 Cash from factoring 4,500,000.00

Net sale price (6,000,000-900,000) 5100000

6,000,000-200,000 5800000
600,000.00 Loss on factoring 700,000.00
Problem 9-1

Walleye Company provided the following transactions:

Jan-01 The entity sold merchandise for P500,000 accepting a note of P500,000
for six months with interest to be paid at maturity at 12%

Mar-01 The entity discounted the note without recourse at the local bank at 15%.

Jul-01 The customer paid the bank in full.

Required:
Prepare journal entries to record the transactions.
Answer:
Prepare journal entries to record the transactions.

Jan-01 Notes receivable 500,000

Sales 500,000

Mar-01 Cash 503,500

Loss on note discounting 6,500
Notes receivables 500,000
Interest income 10,000

Jul-01 No entry
Principal 500,000
Interest (500,000 x 12% x 6/12) 30,000
Maturity value 530,000
Discount (530,000 x 15% x 4/12) 26,500
Net proceeds 503,500

Principal 500,000
Accrued interest receivable (500,000 x 12 x 2/12) 10,000
Carrrying amount of NR 510,000

Net proceeds 503,500

Less: Carrying amount of NR 510,000
Loss on note discounting -6,500