RECEIVABLE FINANCING
Problem 1
On December 1, 2018, Bambi Company assigned specific accounts receivable totaling P2,000,000 as collateral on
P1,500,000, 12% note from a certain bank. Bambi company will continue to collect the assigned accounts receivable and
an addition to the interest on the note, the bank also charged a 5% finance fee deducted in advance on the P1,500,000
value of the note. The December collections of assigned accounts receivable amounted to P1,000,000 less cash discounts
of P50,000. On December 31, 2018, Bambi Company remitted the collections to the bank in payment for the interest
accrued on December 21, 2018 and the note payable.
a. What amount of cash was received from the assignment of accounts receivable on December 31, 2018?
b. What is the carrying amount of note payable on December 31, 2018?
c. What amount should be disclosed as the equity of Bambi Company in assigned accounts on December 31, 2018?
Problem 2
DC Company sold accounts receivable without recourse with face amount of P6,000,000. The factor charged 15%
commission on all accounts receivable factored and withheld 10% of the accounts factored as protection against customer
returns and other adjustments. Daisy Company had previously established an allowance for doubtful accounts of P200,000
for these accounts. By year-end, the entity had collected the factor’s holdback there being no customer returns and other
adjustments.
a. What amount of cash was initially received from factoring?
b. What is the loss on factoring?
Problem 3
On July 1, 2018, K Company sold equipment to McDo Company for P1,000,000. K accepted a 10% note receivable for the
entire sales price. This note is payable in two equal installments of P500,000 plus accrued interest on December 31, 2018
and December 31, 2019. On July 1, 2019, K discounted the note at a bank at an interest rate of 12%.
a. What is the amount received by K Company from the discounting of notes receivable?
Problem 4
Rara Company accepted from a customer a P4,000,000, 90-day, 12% interest bearing note dated August 31, 2018. On
September 30, 2018, Rara discounted the note with recourse at the Bpex Stet Bank at 15%. However, the proceeds were
not received until October 1, 2018. The discounting with recourse is accounted for as a conditional sale with recognition
of a contingent liability.
a. What is the amount received from the discounting of note receivable?
b. What is the loss on note receivable discounting?
Problem 5
On August 31, 2018, SuSu Company discounted with recourse a customer’s note at its bank at a discount rate of 15%. The
note was received from the customer on August 1, 2018, is for 90-days, has a face value of P5,000,000, and carries an
interest rate of 12%. The customer paid the note to the bank on October 30, 2018, the date of maturity.
a. If the discounting is accounted for as a secured borrowing, what is the interest expense to be recognized on August 31,
2018?
INVENTORIES
Problem 1
The information below was taken from the records of Ram Company at the end of current year.
Finished goods in storeroom, at cost, including overhead of P400,000 or 20%. 2,000,000
Finished goods in transit, including freight charge of P20,000, FOB Shipping point 250,000
Finished goods held by salesmen, at selling price, cost, P100,000 140,000
Goods in process, at cost of materials and direct labor 720,000
Materials 1,000,000
Materials in transit, FOB destination 50,000
Defective materials returned to suppliers 100,000
Shipping supplies 20,000
Gasoline and oil for testing finished goods 110,000
Machine lubricants 60,000
a. What is the correct amount of inventory?
Problem 2
The following information applied to Finn Company for the current year:
Merchandise purchased for resale 4,000,000
Freight In 100,000
Freight out 50,000
Purchase returns 20,000
Interest on inventory loan 200,000
What is the inventoriable cost of purchase?
Problem 3
Stown Company had the following consignment transactions during 2018:
Inventory shipped on consignment to BTA Company 1,800,000
Freight paid by Stown 90,000
Inventory received on consignment from ALFA Company 1,200,000
Freight paid by ALFA 50,000
No sales of consigned goods were made in December 31, 2018.
What amount should be included as consigned inventory on December 31, 2018?
Problem 4
On August 1 of the current year, Ai-oon Company recorded purchases of inventory of P800,000 and P1,000,000 under
credit terms of 2/15, net 30. The payment due on P800,000 purchase was remitted on August 16. The payment due on
P1,000,000 purchase was remitted on August 31. Under net method and gross method, these purchases should be
included in at what respective amounts in the determination of costs of goods available for sale?
a. Net Method
b. Gross Method
