Problem Solving - Receivable Financing

1 Pittance Company

1-Mar Cash 2,000,000

Notes payable - bank 2,000,000

1-Apr Cash (1,000,000 x 98%) 980,000

Sales discount (1,000,000 x 2%) 20,000
Accounts receivable 1,000,000

1-Jun Cash 2,000,000

Accounts receivable 2,000,000

1-Sep Note payable - bank 2,000,000

Interest expense (2,000,000 x 12% x 6/12) 120,000
Cash 2,120,000

2 Idealist Company

a. Principal amount of loan 4,000,000

Less: Discount (4,000,000 x 10% x 1yr) 400,000
Cash proceeds 3,600,000

1-Oct-19 Cash 3,600,000

Discount on notes payable 400,000
Notes payable - bank 4,000,000

12/31/2019 To record the amortization of Discount on notes payable

Interest expense (400,000 x 3/12) 100,000

Discount on notes payable 100,000

10/1/2020 To record the payment bank loan

Notes payable 4,000,000

Cash 4,000,000

To record the amortization of Discount on notes payable

Interest expense (400,000 x 9/12) 300,000

Discount on notes payable 300,000

b. Principal of bank loan 4,000,000

Less: Discount on notes payable (400,000 - 100,000) 300,000
Carrying amount of bank loan 3,700,000

"The entity signed a note for the loan and pledged P5,000,000 of its accounts
receivable as collateral for the same."

3 Elegant Company

1-May Accounts receivable - assigned 800,000

Accounts receivable 800,000

Cash 620,000
Service charge 20,000
Notes payable - bank (800,000 x 80%) 640,000

5-May Sales return 30,000

Accounts receivale - assigned 30,000

10-May Cash (500,000 x 98% 490,000

Sales discount (500,000 x 2%) 10,000
Accounts receivable - assigned 500,000

1-Jun Notes payable - bank 490,000

Interest expense (640,000 x 2%) 12,800
Cash 502,800

7-Jun Allowance for doubtful accounts 10,000

Accounts receivable - assigned 10,000
 20-Jun Cash 200,000
Accounts receivable - assigned 200,000

1-Jul Notes payable - bank (640,000 - 490,000) 150,000

Interest expense (150,000 x 2%) 3,000
Cash 153,000

Accounts receivable - assigned

1-May 800,000 5-May 30,000
10-May 500,000
7-Jun 10,000
20-Jun 200,000
End 60,000
800,000 800,000

Accounts receivable 60,000

Accounts receivale - assigned 60,000

4 Docile Company

1-Jul Accounts receivable - assigned 1,500,000

Accounts receivable 1,500,000

Cash 1,065,000
Service charge (1,500,000 x 4%) 60,000
Notes payable - bank (1,500,000 x 75%) 1,125,000

1-Aug notification basis

Notes payable - bank 800,000

Accounts receivable - assigned 800,000

Interest expense (1,125,000 x 2%) 22,500

Cash 22,500

1-Sep (Notification basis)

Notes payable - bank (1,125,000 - 800,000) 325,000

Interest expense (325,000 x 2%) 6,500
Cash 168,500
Accounts receivable - assigned 500,000

Accounts receivable - assigned

1-Jul 1,500,000 1-Aug 800,000
1-Sep 500,000
End 200,000
1,500,000 1,500,000

Accounts receivable 200,000

Accounts receivable - assigned 200,000

5 Grateful Company

1-Jul Accounts receivable - assigned 500,000

Accounts receivable 500,000

Cash 390,000
Service charge (500,000 x 2%) 10,000
Notes payable 400,000

1-Aug Cash 330,000

Accounts receivable - assigned 330,000

Interest expense (400,000 x 1%) 4,000

Notes payable - bank (330,000 - 4,000) 326,000
Cash 330,000

1-Sep Cash 170,000

Accounts receivable - assigned (500,000 - 330,000) 170,000
Notes payable - bank (400,000 - 326,000) 74,000
Interest expense (74,000 x 1%) 740
Cash 74,740