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Problem 8-6 & 8-7 Report

The document describes two transactions where Bleak Company and Vain Company assigned accounts receivable to banks in exchange for loans. For Bleak Company, the assistant provided journal entries to record the assignment of $1.5M in accounts receivable for a $1.3M loan on December 1st. It also recorded the collection of $1M in receivables and payment against the loan and interest on December 31st. For Vain Company, it recorded the assignment of $800k in receivables for a $640k loan on July 1st, and the subsequent collection and payment transactions on August 1st and September 1st.

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7K views3 pages

Problem 8-6 & 8-7 Report

The document describes two transactions where Bleak Company and Vain Company assigned accounts receivable to banks in exchange for loans. For Bleak Company, the assistant provided journal entries to record the assignment of $1.5M in accounts receivable for a $1.3M loan on December 1st. It also recorded the collection of $1M in receivables and payment against the loan and interest on December 31st. For Vain Company, it recorded the assignment of $800k in receivables for a $640k loan on July 1st, and the subsequent collection and payment transactions on August 1st and September 1st.

Uploaded by

jessamae gundan
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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PROBLEM 8-6 (ACP)

Bleak Company provided the following information:

Dec. 1 Assigned P1,500,000 of accounts receivable to a bank on a non-notification


basis in consideration for a loan. The bank advanced P1,300,000 less a service
charge of P50,000. The entity signed a promissory note bearing interest of 1%
per month on the unpaid loan balance.

31 Collected assigned accounts of P1,000,000 less sales discount of P30,000.

31 Remitted the collection to the bank in payment first for the interest and the
balance to the principal.

REQUIRED:

a. Prepare journal entries to record the transactions.

b. Indicate the classification and disclosure of the accounts related to the assignment on
December 31.

REQUIREMENT A

NON-NOTIFICATION BASIS
Dec. 1 Accounts receivable-assigned 1,500,000
Accounts receivable 1,500,000

1 Cash 1,250,000
Service charge 50,000
Note payable-bank 1,300,000

31 Cash 970,000
Sales discount 30,000
Accounts receivable-assigned 1,000,000

31 Note payable-bank 957,000


Interest expense (1% x 1,300,000) 13,000
Cash 970,000

REQUIREMENT B

 The accounts receivable –assigned with a balance of P500,000 should be


classified as current asset and included in trade and other receivables.
 The note payable-bank of P343,000 should be classified and presented as a
current liability.
 The company should disclose the equity in assigned accounts as follows:
Accounts receivable –assigned 500,000
Note payable – bank (343,000)
Equity in assigned accounts 157,000
PROBLEM 8-7 (IAA)

Vain Company financed some of its current operations by assigning accounts


receivable to a bank in consideration for a loan.

On July 1, the entity assigned accounts of P800,000 under a notification basis. The
bank advanced 80% less a 3% service charge of the total accounts assigned.
The entity signed a promissory note bearing interest of 1% per month on the
unpaid loan balance.

On August 1, the entity received a statement that the bank had collected P420,000 of
the assigned accounts.

On September 1, the entity received a second statement from the bank, together with a
check for the amount due. The statement indicated that the bank had collected
P320,000 of the assigned accounts.

REQUIRED:

Prepare journal entries on the books of the assignor to record the transactions.

NOTIFICATION BASIS
July 1 Accounts receivable-assigned 800,000
Accounts receivable 800,000

1 Cash (640,000 – 24,000) 616,000


Service charge (3% X 800,000) 24,000
Note payable-bank 640,000

Aug. 1 Note payable-bank 413,600


Interest expense (1% x 640,000) 6,400
Accounts receivable-assigned 420,000

Sept. 1 Cash 91,366


Interest expense 2,264
Note payable-bank 226,400
Accounts receivable-assigned 320,000

Accounts receivable 60,000


Accounts receivable-assigned 60,000

COMPUTATION:
Loan from bank 640,000
August collection by bank 413,600
Balance due the bank 226,400

Collections by bank 320,000


226,400
Less: Payment of loan
2,264
Interest (1% x 226,400) 228,664
Remittance from bank 91,336

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