Skinner Corp. required additional cash for its operation and used its accounts receivable to raise such needed
Question:
Skinner Corp. required additional cash for its operation and used its accounts receivable to raise such needed cash, as follows:
On December 1, 2022, Skinner assigned on a non-notification basis accounts receivable of P4,000,000 to a bank in consideration for a loan of 90% of the receivables less a 0.5% service fee on the accounts assigned. Skinner signed a note for the bank loan. On December 31, 2022, Skinner collected assigned accounts of P2,400,000 less discount of P160,000. Skinner remitted the collections to the bank in partial payment for the loan. The bank applied first the collection to the interest and the balance to the principal. The agreed interest is 1.25% per month on the loan balance.
Skinner sold P1,750,000 of accounts receivable for P1,350,000. The receivables had a carrying amount of P1,600,000 and were sold outright on a non-recourse basis.
Skinner received an advance of P400,000 from Waterston Bank by pledging P350,000 of accounts receivable.
On December 31, 2022, Skinner discounted at a bank a customer’s P1,200,000, 10-month, 10% note receivable dated April 30, 2022. The bank discounted the note at 15% on the same date.
1. In its December 31, 2022, statement of financial position, how much should Skinner report as note payable in its current liabilities section?
2. How much is Skinner’s equity in the assigned accounts receivable as of December 31, 2022?
3. How much were the proceeds from the note receivable discounted on December 30?
4. How much was debited to the Allowance for Doubtful Accounts during the sale of the receivables?
Intermediate Accounting
ISBN: 978-0176509736
10th Canadian Edition, Volume 1
Authors: Donald Kieso, Jerry Weygandt, Terry Warfield, Nicola Young,