RECEIVABLES - Quiz No. 4 With Answer

ACT1104-Quiz No.
4
Problem 1
On November 30, accounts receivable in the amount of Php900,000 were assigned to a finance company by Pau
Company as security for a loan of Php750,000. The finance company charged a 3% service fee on the accounts; the
interest rate on the note is 12%. During December, Pau Company collected Ph350,000 on assigned accounts after
deducting Php560 of discounts. Pau Company wrote off a Php530 assigned account. On December 31, Pau
Company remitted to the finance company the amount collected plus one month’s interest on the note
Requirements: (2 pts each)
(a) Journalize the above transactions (do not abbreviate the account title)
Assignment of Accounts Receivable
Accounts receivable assigned 900,000

Accounts receivable 900,000
(b) Proceeds of Loan
Cash (750,000 x 97%) 727,500

Finance charge (750,000x3%) 22,500
Loans payable 750,000
(c) Collection of assigned accounts
Cash 350,000
Sales discounts 560
(d) Remittance to the finance company

Interest expense (750,000x12%x1/12) 7,500
Cash 357,500
(e) Accounts written off
Allowance for doubtful accounts 530

Accounts receivable assigned 530
(f) How much is Pau Company’s equity in the assigned accounts receivable as of December 31?
Accounts receivable assigned (900,000-350,560-530) 548,910

Loans payable (750,000-350,000) 400,000
-----------
Equity in the assigned accounts receivable 148,910
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Problem 2
On its second year of operations, Pau Company thought of expanding its business. In order to generate additional
cash necessary for this expansion, the entity on September 1, factored Php200,000 of accounts receivable without
recourse to Finance Company. Factoring fee was 10% of the receivables purchased. The Finance Co. withheld 5%
of the purchase price as protection against sales returns and allowances. On November 2, accounts receivable
amounting to Php500,000 was assigned to Paubaya Bank as collateral on Php300,000, 20% annual interest rate
loan. A 3% finance charge was deducted in advance. As December 31, data relating to accounts receivable follows:
• Allowance for doubtful accounts-Php6,700 (credit)
• Estimated uncollectible -2% of accounts receivable
• Accounts receivable excluding factored and assigned accounts-Php95,000
• Collections on assigned-none
Requirements: (2 pts each)
(a) Entry to record factoring of receivable
Cash (200,000x85%) 170,000

Factor’s holdback or receivable from factor (200,000x10%) 20,000
Loss on factoring (200,000x5%) 10,000
(b) Entry to record assignment of accounts receivable

(c) Entry to record proceeds of loan
Cash (300,000x97%) 291,000
Finance charge (300,000x3%) 9,000
(d) The total cash generated from factoring and assigning the accounts receivable was ________.
Proceeds from factoring 170,000
Proceeds of loan 291,000
------------
461,000
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Problem 3
Pau Company wishes to discount notes receivable arising from the sale of merchandise to meet some maturing
obligations. The note has a face amount of Php50,000 and is due in one year. The Note is to be paid with an interest
of 12%. The bank rate on discounting notes is 12%. The note was discounted ten months prior to maturity date.
Requirements:
Compute the following: (2pts each)
(a) Interest earned, Php5,000
(b) Interest to maturity, Php6,000
(c) Carrying value, Php55,000
(d) Maturity value, Php56,000
(e) Discount, Php1,120
(f) Proceeds, P54,880
(g) Loss on discounting, Php120
(h) Present your computations below to answer the above questions. (5 pts)
Interest to maturity: 50,000 x 12% = 6,000

10 months 2 months
Date of note---------------------------------------Date of discounts--------------------------------Maturity value
Interest earned= 50,000x12%x10/12 Discount= 56,000x12%x2/12 MV=50,000+6,000
= 5,000 = 1,120 = 56,000
Carrying value=50,000+5,000 Proceeds=56,000-1,120 Loss = 55,000-54,880

= 55,000 = 54,880 = 120
(i) Journal entry to record the above transaction assuming the note was discounted with recourse.(3pts)
Cash 54,880
Loss on discounting 120
Notes receivable discounted 50,000
Interest income 5,000
(j) Journal entry to record the above transaction assuming the note was discounted without recourse.(3pts)
Cash 54,800
Loss on discounting 120
Notes receivable 50,000
Interest income 5,000
Problem 4
On January 1 2024, Pau Company reported the following information:
Accounts receivable Php 1,500,000

Allowance for doubtful accounts 60,000
The following summary transactions affecting accounts receivable occurred during the current year:
Sales-all on account 2/10,1/15,n/60 Php 7,935,000

Cash received from customers 8,000,000
The Cash received from customers included the following:
Customers paying within the 10-day discount period 4,410,000
Customers paying within the 15-day discount period 2,475,000
Recovery of accounts written off 15,000
Customers paying beyond the discount period ?
Accounts receivable written off as worthless 55,000
Credit memorandum for sales return 30,000
Required:
Prepare journal entries:
(a) Sales on account (2 pts)
Accounts receivable 7,935,000

Sales 7,935,000
(b) Cash received from customers(4pts)
Cash 8,000,000
Sales discount*** 140,000
Accounts receivable 8,140,000
*** 4,410,000/98%x2%= 90,000
2,475,000/99%x2%= 50,000
--------------
140,000
========
(c) Recovery of accounts previously written off (2pts)

(d) Accounts receivable written off (2pts)
(e) Credit memorandum for sales return (2pts)
Sales return and allowances 30,000

(f) Adjusted balance of Accounts Receivable (2pts)

Accounts Receivable
------------------------------------------------------------------------------------------
Jan 1 balance 1,500,000 :
(a) 7,935,000 : 8,140,000 (b)
(c) 15,000 : 55,000 (d)
: 30,000 (e)
--------------------------------------------------------------------------------------------
Dec 31 balance 1,225,000 :
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ACT1104-Quiz No.

Accounts receivable assigned 900,000

Cash (750,000 x 97%) 727,500

Loans payable 350,000

Allowance for doubtful accounts 530

Accounts receivable assigned (900,000-350,560-530) 548,910

Cash (200,000x85%) 170,000

Accounts receivable assigned 500,000

Interest to maturity: 50,000 x 12% = 6,000

Carrying value=50,000+5,000 Proceeds=56,000-1,120 Loss = 55,000-54,880

Accounts receivable Php 1,500,000

Sales-all on account 2/10,1/15,n/60 Php 7,935,000

Accounts receivable 7,935,000

Accounts receivable 15,000

Sales return and allowances 30,000

(f) Adjusted balance of Accounts Receivable (2pts)

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