Instruction: Provide the necessary answers for each problem.

Problem 1

Lolita Company provided the following information in connection with a bank loan.

March 1 Lolita Company borrowed P1,000,000 from the bank on a six-month note carrying an interest of 10% per annum. Accounts of P2,000,000 are pledged to secure the loan.

April 1 Pledged accounts of P500,000 are collected minus 2% discount.

June 1 The remaining pledged accounts are collected.

Sept. 1 The bank loan is repaid plus interest.

Required: Prepare the journal entries to record the transactions (5 points)

Problem 2

Element Company provided the following transactions:

May 1 Element Company assigned P800,000 of accounts receivable to a bank in consideration for a loan. A cash advance of 80% less service charge of P20,000 was made by the latter.

It was agreed that interest of 2% per month is to be made and the assignor continues to make the collections. The entity assigned a promissory note for the loan.

5 The entity issued a credit memo to a customer for returned merchandise, P30,000. The account is one of the assigned accounts.

10 Collections of P500,000 of the assigned accounts were made, less 2% discount.

June 1 Remitted the collections to the bank plus 2% interest for one month.

7 Assigned accounts of P10,000 proved to be worthless.

20 Collections of P200,000 for the accounts assigned were made.

July 1 Final settlement was made with the bank. Element Company accordingly remitted the total amount due the bank to pay off the loan plus interest charged.

Required: Provide the necessary journal entries to record the transactions. (10 points)

Problem 3

Dormant Company assigned certain accounts receivable to a bank for a loan on the following basis: 75% cash advance, 4% service charge on gross accounts assigned, 2% interest per month is to be charged, the bank makes the collections. The entity assigned a promissory note for the loan.

July 1 Received remittance upon the specific assignment of P1,500,000 in accounts to the bank.

Aug. 1 Received notice from the bank that P800,000 of the assigned accounts were collected. A check was sent to the bank for one month interest charged.

Sept. 1 Received notice from the bank that assigned accounts of P500,000 were collected in full and the remaining accounts of P200,000 were being returned. Accordingly, a check was received from the bank in settlement of the assignment contract. In making the settlement, the bank deducted the interest charged for the corresponding period.

Required: Provide the necessary journal entries on the books of the assignor. (10 points)

Problem 4

Petite 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 receivable factored as protection against customer returns and other adjustments.

The entity 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.

Required: Prepare necessary journal entries. (5 points)

Problem 5

Sailor Company provided the following transactions:

April 5 Received from A, a customer, P550,000, 60-day, 12% note, dated April 4, in payment of an account.

19 The note of A was discounted with the bank at 14%.

May 3 Received a P1,000,000, 30-day noninterest bearing note dated May 1 from B, in payment of an account.

16 The note of B was discounted with the bank at 12%.

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%.

June 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.

15 Received a 60-day, 12% note, P800,000, dated June 15, from D, a customer for sale of merchandise.

18 Received full payment from A including interest of 12% on total amount due from maturity date of original note.

Required: Prepare the journal entries to record the transactions assuming any discounting of notes receivable is accounted for as conditional sale. (15 points)