Reference no: EM132814496
Question - On April 1, 2020, Alyjan Company discounted with recourse a 9-month, 10% note dated January 1, 2020, with a face amount of P6,000,000. The bank discount rate is 12%. The discounting transaction is accounted for as a conditional sale with recognition of contingent liability.
On October 1, 2020, the maker dishonored the note receivable. Alyjan paid the maturity value of the note plus protest fee of P50,000 to the bank, and charged the whole amount to the maker.
On December 31, 2020, Alyjan collected the dishonored note receivable in full plus 12% annual interest on the total amount due.
Required: Solve the problem manually on paper. picture and upload as part of your requirement.
Answer the following questions:
1. What amount was received from the note receivable discounting on April 1, 2020?
6,063,000
5,963,000
6,150,000
6,450,000
2. What amount should be recognized as loss on note receivable discounting?
87,000
450,000
63,000
387,000
3. What is the total amount collected from the customer on December 31, 2020?
6,500,000
6,450,000
6,662,500
6,695,000
4. If the discounting is secured borrowing, what is included in the journal entry to record the transaction?
Credit Liability for Note Discounted, P6,063,000
Credit Interest Income, P63,000
Debit Interest Expense, P87,000
Debit Loss on Note Receivable Discounting, P87,000