Reference no: EM132716529

Neophyte Company has experienced a critical cash flow problem largely occasioned by collection problems with customers. Consequently, it has become involved in a number of transactions relating to note receivable.

The following transactions occurred during a period ending December 31:

1. May 1 Received a P200, 000, 90-day, 12% interest bearing note from EF, a costumer, in settlement of an account.
2. 1 Received a P300, 000, sic-month, 12% interest bearing note from MN, a costumer, in settlement of an account
3. July 30 EF defaulted on the P200, 000 notes.
4. Aug. 1 Discounted the MN note at the bank at 15%.
5. Sept.1 Received a one-year noninterest bearing note from DJ, a costumer, in settlement of a P120, 000 account receivable. The face of the note was P132, 000.
6. 28 Collected the defaulted EF note plus accrued interest 12% per annum on the total amount due.
7. Oct. 1 Received a P500, 000, 90-day note from RS, a costumer. The note was in payment for goods sold and was interest bearing at 12%.
8. Nov.1 MN defaulted on the P300, 000 notes. The entity paid the bank the total amount due plus at a P12, 000 protest fee and the other bank charges.
9. Dec.30 Collected RS note in full.
10. 31 Collected from MN in full including interest on total amount due at 12% since default date.

Required:

Problem A. Prepare journal entries to record the transaction assuming any discounting of note receivable is accounted for as conditional sale with recognition of a contingent liability.