Sir Win – Accounting Lectures
Jokes Tagalog
Stories
Life Lessons
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Lecture 02: Accounts Receivable
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Assume the following data for Analyn Sevilla Company:
List price of the merchandise sold 200,000
Trade discount 10%, 20%
Sales discount 3/10, 2/15, n/30
Invoice price of items returned 10,000
Date of sales October 5, 2024
Date collected October 20, 2024
Freight cost 2,000
Freight term FOB shipping point, Freight prepaid
Required:
1. Compute for the receivable balance on the date of sale
2. Net cash collection on October 20, 2024
Sir Win – Accounting Lectures
Jokes Tagalog
Stories
Life Lessons
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Adjusting Entries: Doubtful Accounts
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For the year ended December 31, 2021, Mara Enterprise reported accounts
receivable of 6,000,000 and allowance for doubtful accounts of 300,000 at
the beginning of the year. Service Revenues totaled 14,000,000.
Required: Journal entries for doubtful accounts
1. Assuming that 4.5% of total service revenue is used in estimating
doubtful accounts expense
2. Assuming that 15% of total receivable is uncollectible
The following are the composition of the accounts receivable:
3. Aging of accounts receivable has been used
Outstanding Accounts Receivable Collection Probability
Under 15 days 3,000,000 .96
16 – 30 days 2,000,000 .90
31 – 45 days 400,000 .80
46 – 60 days 300,000 .70
61 – 75 days 300,000 .65
Total Receivable 6,000,000
Sir Win – Accounting Lectures
Jokes Tagalog
Stories
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Life Lessons
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Lecture 04: Notes Receivable
Interest Bearing - with realistic interest rate
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On January 1, 2024, Leona Dacillo Co. sold an equipment to June Menguito
Co. In lieu of cash payment, Menguito gave Dacillo a 4-year 100,000, 10%
note. The note requires interest to be paid annually on December 31. The
equipment has a cost of 500,000 and accumulated depreciation as of
January 1, 2024 of 350,000.
The 10% interest rate is a realistic rate of interest for a note of this type.
Required:
A. Compute for the following as of December 31, 2024
1. Gain or loss on sale of equipment
2. Interest income
3. Current portion of notes receivable
4. Non current portion of notes receivable
B. Prepare the entries in 2024
Sir Win – Accounting Lectures
Jokes Tagalog
Stories
Life Lessons
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Lecture 04: Notes Receivable
Non Interest Bearing Note – One Time Payment
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On January 1, 2024, Elsa Dedal Co. sold an equipment to Camille Tiongco
Co. In lieu of cash payment, Tiongco gave Dedal a 5-year 500,000 note. The
equipment has a cost of 500,000 and accumulated depreciation as of
January 1, 2024 of 150,000.
The note is a non interest bearing note and the prevailing rate of interest for
a note of this type is 10%.
Present value of 1 for 5 periods at 10% 0.6209
Required:
A. Compute for the following as of December 31, 2024
1. Gain or loss on sale of equipment
2. Interest income
3. Current portion of notes receivable
4. Non current portion of notes receivable
B. Prepare the entries in 2024
Sir Win – Accounting Lectures
Jokes Tagalog
Stories
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Life Lessons
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Lecture 04: Notes Receivable
Interest Bearing - with unrealistic interest rate
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On January 1, 2024, Leona Dacillo Co. sold an equipment to June Menguito
Co. In lieu of cash payment, Menguito gave Dacillo a 4-year 100,000, 10%
note. The note requires interest to be paid annually on December 31. The
equipment has a cost of 500,000 and accumulated depreciation as of
January 1, 2024 of 350,000.
The prevailing rate of interest for a note of this type is 16%.
Present value of 1 for 4 period at 16% 0.5523
Present value of ordinary annuity of 1
for 4 period at 16% 2.7982
Required:
A. Compute for the following as of December 31, 2024
1. Gain or loss on sale of equipment
2. Interest income
3. Current portion of notes receivable
4. Non current portion of notes receivable
B. Prepare the entries in 2024
Sir Win – Accounting Lectures
Jokes Tagalog
Stories
Life Lessons
Lecture 04: Notes Receivable
Non Interest Bearing Note – Uniform Annual Payment
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On January 1, 2024, Elsa Dedal Co. sold an equipment to Camille Tiongco
Co. In lieu of cash payment, Tiongco gave Dedal a 3-year 600,000 note. The
equipment has a cost of 500,000 and accumulated depreciation as of
January 1, 2024 of 150,000.
The note is a non interest bearing note and the prevailing rate of interest for
a note of this type is 14% and the principal amount is to be paid in three
equal annual installment of 200,000.
Present value of ordinary annuity of 1
for 3 periods at 14% 2.3216
Required:
A. Compute for the following as of December 31, 2024
1. Gain or loss on sale of equipment
2. Interest income
3. Current portion of notes receivable
4. Non current portion of notes receivable
B. Prepare the entries in 2024
Sir Win – Accounting Lectures
Jokes Tagalog
Stories
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Life Lessons
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Lecture 01: Loans Receivable
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Angelus Bank granted a loan to a borrower on January 1, 2024. The
interest on the loan is 10% payable annually starting December 31,
2024. The loan matures in three years on December 31, 2026.
Principal amount 4,000,000
Origination fee charged against the borrower 342,100
Direct origination cost incurred 150,000
After considering the origination fee charged against the borrower and
the direct origination cost incurred, the effective rate on the loan is
12%.
A. Compute for the following
1. Carrying amount of loan receivable
i. as of January 1, 2024
ii. as of December 31, 2024
2. Interest income for
i. year 2024
ii. year 2025
B. Journal entries for 2024 – 2025
Sir Win – Accounting Lectures
Jokes Tagalog
Stories
Life Lessons
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Lecture 02: Impairment of Loans Receivable
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On January 1, 2024, Heyaiza Bank loaned 3,000,000 to a borrower. The
contract specified that the loan had a 6-year term and a 9% interest
rate.
Interest is payable annually every December 31 and the principal
amount will be collected on December 31, 2029. Interest is collected for
2024.
On December 31, 2024, the bank determined that the loan has a 12-
month probability of default of 10% and expected only to collect only
90% of the loan.
On December 31, 2025, the bank determined that there is a significant
increase in the credit risk of the loan but no objective evidence of
impairment. Based on relevant information, the bank concluded that
there is a 30% probability of default over the remaining term of the loan
and it is expected that only 60% of the loan will be collected. Interest is
collected in 2025.
On December 31, 2026, the borrower was under financial difficulty and
the loan was considered impaired because there is now objective
evidence of impairment. The bank agreed that only 40% of the principal
will be collected on due date. Interest is collected for 2026.
The entity decided to apply for the three-stage approach of determining
the impairment of loan.
The present value of 1 at 9% is 0.6499 for 5 periods, 0.7084 for 4
periods, and 0.7722 for 3 periods.
Required: Journal entries for 2024 - 2027
Sir Win – Accounting Lectures
Jokes Tagalog
Stories
Life Lessons
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Lecture 02: Pledging of Accounts Receivable
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On December 1, 2024, Maricris Carrera Manufacturing borrowed P500,000
from Ningning Bank by issuing a one-year note, which the bank discounted
at 12%. Accounts Receivable totaling P1,200,000 are pledged to secure the
loan.
On December 15, 2024, the company collected 200,000 from the accounts
receivable pledged.
Required:
Journal entries for 2024
Sir Win – Accounting Lectures
Jokes Tagalog
Stories
Life Lessons
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Lecture 03: Assignment of Accounts Receivable
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Erna Delfin Manufacturing entered into an assignment arrangement with
Mahzum Finance Company whereby the assignee would advance 80% of all
accounts assigned less a P2,000 service charge. During the year, P400,000
of accounts receivable were assigned; P200,000 collections were made on
outstanding accounts which were remitted to Mahzum Finance Company to
apply first to P1,500 interest and the balance to the principal. Sales returns
and allowances on assigned accounts amounted to P8,500.
Assume further that later during the year, P150,000 of the assigned accounts
were collected and that the balance due and additional interest of P875 were
remitted to the finance company.
Required:
Journal entries
Sir Win – Accounting Lectures
Jokes Tagalog
Stories
Life Lessons
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Lecture 05: Discounting of Notes Receivable
Without Recourse
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On December 21, 2020, ABC Manufacturing discounted the 60-day, 15%
P800,000 note from Customer F at National Bank. The note is dated
December 1 and the bank’s account rate is 18%. The discounting is treated
as on a without recourse basis. (assume a 360-day year)
Required: Journal entries on the date of discounting
Sir Win – Accounting Lectures
Jokes Tagalog
Stories
Life Lessons
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Lecture 04: Factoring of Accounts Receivable
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During October, Julius Moral Manufacturing sold goods priced at P500,000
with credit terms of n/45. These were immediately factored to a finance
company. The factoring fee was 10% of the receivables purchased. The
factor’s holdback is 5% of the purchase price.
Sales return recorded on the factored accounts receivable totaled 5,200; the
balance of the factor’s holdback was settled by the finance company.
Required: Journal entries
Sir Win – Accounting Lectures
Jokes Tagalog
Stories
Life Lessons
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Lecture 05: Discounting of Notes Receivable
With Recourse
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On January 1, 2024, Charisse Ann Aguirre Company sold land with carrying
amount of 6,000,000 in exchange for a 9-month, 10% note with face amount
of 8,000,000. The rate properly reflects the time value of money for this type
of note.
On April 1, 2024, the entity discounted the note with recourse at the bank
discount rate of 12%.
On October 1, 2024, the maker dishonored the note receivable. The entity
paid the bank the maturity value of the note plus protest fee of 100,000.
On December 31, 2024, the entity collected the dishonored note receivable
in full plus 12% annual interest on the total amount due.
Required: Journal entries to record the transactions assuming the
discounting transaction is accounted for as:
a. Secured Borrowing
b. Conditional Sale
