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    Mythical Company Provided The Following Transactions:: University - Year 2 Accounting

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    collegestudent2000
    Mythical Company received various notes receivable from customers in payment of accounts. They discounted two of the notes with a bank, resulting in losses. One note was dishonored at maturity and had to be paid back to the bank along with fees. Adjusting entries are needed to accrue interest receivable on an outstanding note and remove the contingent liability for another note that matured without dishonor.

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    Mythical Company Provided The Following Transactions:: University - Year 2 Accounting

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    collegestudent2000
    754 views2 pages
    Mythical Company received various notes receivable from customers in payment of accounts. They discounted two of the notes with a bank, resulting in losses. One note was dishonored at maturity and had to be paid back to the bank along with fees. Adjusting entries are needed to accrue interest receivable on an outstanding note and remove the contingent liability for another note that matured without dishonor.

    Original Description:

    This document contains exercises on Intermediate Accounting.

    Original Title

    0201 Accounting (16)

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    Mythical Company received various notes receivable from customers in payment of accounts. They discounted two of the notes with a bank, resulting in losses. One note was dishonored at maturity and had to be paid back to the bank along with fees. Adjusting entries are needed to accrue interest receivable on an outstanding note and remove the contingent liability for another note that matured without dishonor.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    754 views2 pages

    Mythical Company Provided The Following Transactions:: University - Year 2 Accounting

    Uploaded by

    collegestudent2000
    Mythical Company received various notes receivable from customers in payment of accounts. They discounted two of the notes with a bank, resulting in losses. One note was dishonored at maturity and had to be paid back to the bank along with fees. Adjusting entries are needed to accrue interest receivable on an outstanding note and remove the contingent liability for another note that matured without dishonor.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 2

    University - Year 2

    Accounting

    EXERCISE 9

    Mythical Company provided the following transactions:

    APR 5 Received from A, a customer, P500,000, 60-day, 12% note, dated April
    4, in 'payment of an account.
    Apr-05 Notes receivable 500,000
    Accounts receivable 500,000
    APR 15 The note of A was discounted with the bank at 14%.
    Apr-19 Cash 501,075
    Loss on note discounting 1,425
    Notes receivable discounted 500,000
    Interest income 2,500
    Principal 500,000
    Add: Interest (500,000 x 12% x 60/360) 10,000
    Maturity value 510,000
    Less: Discount (510,000 x 14% x 45,360) -8925
    Net proceeds 501,075

    Principal 500,000
    Accrued interest receivable (500,000 x 12% x 15/360) 2,500
    Carrying amount of N/R 502,500

    Net proceeds 501,075


    Loss: Carrying amount of N/R -502,500
    Loss on discounting -1,425
    MAY 3 Received a P1,000,000, 30-day noninterest bearing note dated May 1
    from B, in payment of an account.
    30-day Non-Interest Bearing Note
    May-03 Notes receivable 1,000,000
    Accounts receivable 1,000,000
    MAY 16 The note of B was discounted with the bank at 12%.
    May-
    16 Cash 995,000

    Loss on discounting 5,000


    1,000,00
    Notes receivable discounted 0
    Principal 1,000,000
    Less: Discount (1,000,000 x 12% x 15/360) - 5,000
    Net proceeds 995,000
    MAY 25 Received from C, a customer, a P1,500,000, 60-day 12% note dated May
    15 and made by Company X. Gave the customer credit for the maturity
    value of the note less discount at 12%.
    60-day Interest Bearing Note
    May-25 Notes receivable 1,500,000
    Interest income 4,500
    Accounts receivable 1,504,500
    Principal 1,500,000
    Add: Interest (1,500,000 x 12% x 60/360) 30,000
    Maturity value 1,530,000
    Less: Discount (1,530,000 x 12% x 50/360) - 25,500
    Net credit 1,504,500
    JUN 7 Received notice from the bank that the note of A Was not paid on maturity.

    Paid bank the amount due plus protest fee and other charges of P20,000.
    *dishonored
    Jun-07 Accounts receivable (510,000 + 20,000) 530,000 note
    Cash 530,000
    Notes receivable discounted 500,000
    Notes receivable 500,000
    JUN 15 Received a 60-day, 12% note, P800,000, dated June 15, from D, a customer
    for sale of merchandise.
    Jun-15 Notes receivable 800,000
    Sales 800,000
    JUN 18 Received full payment from A including interest of 12% on total amount
    due from maturity date of original note.
    Jun-18 Cash 532,650
    Accounts receivable 530,000
    Interest income (530,000 x 12% x 15/360) 2,650
    Required: Prepare journal entries to record the transactions assuming any discounting
    of note receivable is accounted for as conditional sale with recognition of a
    contingent liability.
    Adjusting Entries
    1.) Accrued interest receivable 4,000
    Interest income (800,000 x 12% x 15/360) 4,000
    (Accrued interest on D's note)
    2.) Notes receivable discounted 1,000,000
    Notes receivable 1,000,000
    (To cancel the contingent liability on B's note. This note matured on
    May 31. Since there is no notice of dishonor, it is assumed that the
    said note is paid on the date of maturity.)
    Required: Prepare the necessary adjustments on June 30.

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