Problem 10-8

(BANCO)

Net Selling Price:

PV of Principal (2,000,000x0.7118) 1,423,600
Add: Pv of Interest (2,000,000x10%x2.4018) 480,360 1,903,960
Less: CA of Equipment
Cost 1,000,000
Less: Accumulated Depreciation 150,000 850,000
Gain on Sale 1,053,960

Amortization Table
Interest Present
Date Interest Collection Income Discount Amortization Value
01/01/2018 1,903,960

12/31/2018 200,000 228,475 28,475 1,932,435

12/31/2019 200,000 231,892 31,892 1,964,327

12/31/2020 200,000 235,719 35,673 2,000,000

1.) B
2.) B
3.) A
4.) A
5.) C

10-9 (Escranda)

Net Selling Price:

PV of principal (2M x .7050) 1,410,000
Add; PV of interest (2Mx.5%x4.9173) 491,730 1,901,730
Less: CA of machinery
Cost 1,000,000
Less: Accumulated Depreciation 150,000 850,000
Gain on sale b. 1,051,730

Amortization Table:
Date Int. Collection Int. Income D. Amortization Present Value
01/01/2018 1,901,730
06/30/2018 100,000 114,104 14,104 1,915,834
12/31/2018 100,000 114,950 14,950 1,930,784
06/30/2019 100,000 115,847 15,847 1,946,631
12/31/2019 100,000 116,798 16,798 1,963,429

Interest Income for 2018 b. ₱229,054

CA of notes as of 12/31/18 b. ₱1,930,784
Current portion of notes on 12/31/18 a. Nil
Non current portion of notes on 12/31/18 d. ₱1,930,784
Problem 10-11 (MENDOZA)
Non-interest bearing note with unrealistic interest rate, non-uniform collection of principal

PV of Note Receivable
Date Payment to Principal PV Factor PV of Payment
Dec 31, 2018 ₱ 1,000,000.00 0.8929 ₱ 892,900
Dec 31, 2019 ₱ 600,000.00 0.7972 ₱ 478,320
Dec 31, 2020 ₱ 200,000.00 0.7118 ₱ 142,360
PV of the Note Receivable ₱ 1,513,580

Historical Cost ₱ 1,000,000

Accumulated Dep ₱ 150,000
Carrying Value of the Equiptment ₱ 850,000

PV of the Note Receivable ₱ 1,513,580

Carrying Value of the Equiptment ₱ 850,000
Gain on Sale of the Equiptment ₱ 663,580

Date Interest Income Payment Received Carrying Amount

Jan 1, 2018 ₱ 1,513,580
Dec 31, 2018 ₱ 181,630 ₱ 1,000,000 ₱ 695,210
Dec 31, 2019 ₱ 83,425 ₱ 600,000 ₱ 178,635
Dec 31, 2020 ₱ 21,365 ₱ 200,000 -

Current Portion by Dec 31, 2018

Method 1
Payment to be Received ₱ 600,000
Interest Income 2019 ₱ 83,425
Current Portion by Dec 31, 2018 ₱ 516,575

Method 2
Carrying Amount Dec 31, 2018 ₱ 695,210
Carrying Amount Dec 31, 2019 ₱ 178,635
Current Portion by Dec 31, 2018 ₱ 516,575

No. 1 B ₱ 663,580
No. 2 B ₱ 181,630
No. 3 A ₱ 695,210
No. 4 B ₱ 516,575
No. 5 D ₱ 178,635

Problem 10-12 (Añon)

Net selling price = present value of principal

( 1,800,000 x .7118) 1,281,240
Less: Carrying amount of machinery
Cost 1,000,000
Less: Accumulated depreciation 150,000 850,000
Gain on sale 431,240

Amortization table
Date Interest Income Present value
01/01/18 1,281,240
12/31/18 153,749 1,434,989
12/31/19 172,199 1,607,188
12/31/20 192,812 1,800,000

Q1: Q4:
B. ₱431,240 B. Nil

Q2: Q5:
B. ₱153,749 A. 1,434,989

Q3:
A. ₱1,434,989
 10-30) MARASIGAN
Q1:
Unadjusted Trade Accounts Receivable PHP 1,660,000.00
(b) Notes Receivable as part of A/R (200,000.00)
(c) Factored Accounts Receivable (160,000.00)
(d) Sale (FOB-SP) 100,000.00
Adjusted Trade Accounts Receivable PHP 1,400,000.00

Q2:
Allow. For Doubtful Accounts
End Bal. PHP 223,000 Beg. Bal. PHP 100,000
Write-off PHP 28,000 Recovery -
DAE PHP 151,000

Q3:
Unadjusted Net Sales 15,000,000
(d) Sales (FOB-SP) 100,000
Total Sales 15,100,000
1%
Doubtful Account Expense 151,000

Q4: No effect, the inventory accout is correctly accounted.

Q5:
(d) Sales (FOB-SP) 100,000

Problem 10-31 (MANGOBA)

1.) B. Selling Price Php 400,000.00

Factors (400,000 x 20%) Php (80,000.00)
Factoring Fee (400,000 x 5%) Php (20,000.00)
Net Cash Received Php 300,000.00

3.) A. Principal Php 318,000.00

Protest Fee Php 12,000.00
Total Cash Paid Php 330,000.00

5. ) D. Total Cash Paid Php 330,000.00

Interest Income (330,000 x 12% 2/12) Php 6,600.00
Cash Received Php 336,600.00

2.) C. Principal Php 300,000.00

Interest (300,000 x 12% x 6/12) Php 18,000.00
Maturity Value Php 318,000.00
Discount (318,000 x 15% x 3/12) Php (11,925.00)
Net Proceed Php 306,075.00

4. ) B. Notes Payable (600,000 x 80%) Php 480,000.00

Service Charges (600,000 x 5%) Php (30,000.00)
Cash Received Php 450,000.00

6.) D. A/R - Unassigned 2M - (300T + 400 + 600) Php 700,000.00

A/R - Assigned Php 600,000.00
Total Php 1,300,000.00
AFDA (1,300,000 X 5%) Php 65,000.00
Net Realizable Value of A/R Php 1,235,000.00
10-32 PADUA 1.)
60 days and below 1,000,000.00
Nov 1 2018 50,000.00
NSF 30,000.00
Tim - 10,000.00
Boris - 32,000.00
Parker (20k + 32k) 52,000.00
Leonard - 47,400.00
Danny - 30,000.00
Kawhi 20,000.00
Total 1,032,600.00

2.)
60 days and below 1,032,600.00
61 to 90 (500k-14.8k) 485,200.00
over 90 (400k-20k) 380,000.00
adv to officers 150,000.00
account w/ credit bal - 50,000.00
Total 1,997,800.00

3.)
1032600 × 4% 41,304.00
485200 × 5% 24,260.00
380000 × 10% 38,000.00
ADA end 103,564.00

4.)
unadjusted ADA 100,000.00
Write off - 20,000.00
80,000.00
ADA end 103,564.00
23,564.00

Problem 10-33 (catague)

Adjusting Entries:
20,000
Accounts Receivable 20,000
Allowance for Doubtful Accounts
16,000
Sales Discount 16,000
Accounts Receivable
30,000
Accounts Receivables 30,000
Allowance for Doubtful Accounts
30,000
Miscellaneous Income 30,000
Accounts Receivable

1. Answer: B.

Computation: 784,000/98% X 2% 16,000

Sales Discount

Adjusting Entries:
400,000
Loan Receivable 400,000
Interest Income
45,382
Unearned Interest Income 45,382
Interest Income

2. Answer: C
4,000,000 X 10% 400,000
Computation:

Accounts Receivable 220,000 2,720,000 End, balance

Beg. balance 4,000,000 30,000 Recoveries
Sales on Account 30,000 1,500,000 Total Collections, gross of discounts
Recoveries 4,250,000 4,250,000
Total
Computation for Collection:
700,000
Collections without discounts 784,000
Collections with discounts 16,000
Cash Discount 1,500,000
Total Collections from customers
excluding recoveries

Allowance for Doubtful

Accounts 170,000 20,000 Beg. balance
End, balance 30,000 Recoveries
120,000 Doubtful Account Expense
170,000 170,000
Total
2,720,000
Accounts Receivable -170,000
Allowance for Doubtful Accounts 2,250,000
Net Realizable Value

3. Answer: D

Computation:
4,000,000
Principal 11,520
Direct Origination Cost incurred -300,000
Direct origination cost received 3,711,520
Initial carrying amount
Collections Interest Income Amortization Carrying Amount
Date 3,711,520
01/01/2017 400,000 445,382 45,382 3,756,902
31/12/2017 400,000 450,828 50,828 3,807,731
31/12/2018 400,000 456,928 56,928 3,864,658
31/12/2019 400,000 463,759 63,759 3,928,417
31/12/2020 400,000 471,410 71,583 4,000,000
31/12/2021

4. Answer: D.
5. Answer: A
Problem 10-34 (Escanilla)

Question No. 1
Unrecorded gain on sale of machinery – 2017 (see below) 90,183 a
Unrecorded interest income – receivable from sale of machinery
(240,183 x 12%) 28,822
Unrecorded accrued interest – receivable from sale of plant
(1,500,000 x 12% x 9/12) 135,000
Net Adjustment to R/E – 01/01/18 (B) . PHP 254,005

Cash Consideration 200,000

Add: Present Value of Future Cash Flows (2.4018 x 100,000) 240,183
Total Selling Price 440,183
Less: Carrying Value of Machine (800,000 – 450,000) (350,000)
Gain on Sale of Machine 90,183 a

Amortization table (receivable from sale of machinery)

DATE COLLECTION INTEREST INCOME AMORTIZATION CARRYING AMOUNT

1/1/2017 240, 183

12/31/2017 100,000 28, 822 71, 178 169, 005

12/31/2018 100,000 20, 821 79, 719 89, 286

12/31/2019 100,000 10, 714 89, 286 ---

Question No. 2
Interest income from note receivable:
Sale of Machinery (169,005 x 12%) 20,281
Sale of Plant [(1,500,000 x 12% 3/12) + (1M x 12% x 9/12)] 135,000
Sale of Equipment (170,750 x 10% x 9/12) 12,806
Total interest income (C) PHP 168,087

Question No. 3
Current portion of note receivable from:
Sale of Machinery (see amortization table above) 89,286
Sale of Plant 500,000
Total current portion (B) PHP 589,286

Question No. 4
Non-current portion of note receivable from:
Sale of Plant 500,000
Sale of Equipment (170,750 + 12,806) 183,556
Total non-current portion (D) PHP 683,556

Question No. 5
Interest income from sale of Machine 20,281
Interest income from sale of Plant (180,000 – 135,000) (45,000)
Interest income from sale of Equipment . 12,806
Net overstatement of income (D) PHP (11,912)